Recently there have been news reports about the NITI Aayog submitting its recommendations on improving the financial health of Air India to the Ministry of Finance.[1],[2] The Civil Aviation Ministers have also mentioned that the Ministry will soon propose a roadmap for the rejuvenation of the national airline. While the NITI Aayog report is not out in the public domain yet, we present a few details on the financial health of the airline.
Finances of Air India
In 2015-16, Air India earned a revenue of Rs 20,526 crore and registered losses of Rs 3,837 crore. As of March 31, 2015, the total debt of Air India was at Rs 51,367 crore.[3] This includes Rs 22,574 crore outstanding on account of aircraft loans. The figure below shows the losses incurred by Air India in the last few years (2007-16).
According to the Ministry of Civil Aviation, reasons for Air India’s losses include: (i) the adverse impact of exchange rate variation due to the weakening of Indian Rupee, (ii) high interest burden, (iii) increase in competition, especially from low cost carriers, and (iv) high fuel prices.[4] The National Transport Development Policy Committee (NTDPC), in its report in 2013, had observed that with the increase in the number of airlines in the market, Air India has been struggling to make a transition from a monopoly market to a competitive one.[5] These struggles have been primarily regarding improving its efficiency, and competing with the private airlines.
Turnaround Plan and Financial Restructuring
In order to bail out the company, the government had approved the Turnaround Plan (TAP) and Financial Restructuring Plan (FRP) of Air India in April 2012.[6] Under the plans, the government would infuse equity into Air India subject to meeting certain milestones such as Pay Load Factor (measures capacity utilisation), on time performance, fleet utilisation, yield factor (average fare paid per mile, per passenger), and rationalisation of the emolument structure of employees.7 The equity infusion included financial support towards the repayment of the principal, as well as the interest payments on the government loans for aircraft acquisition. Under the TAP/FRP, the central government was to infuse Rs 30,231 crore till 2020-21. As of 2016-17, the Ministry has infused an equity amount of Rs 24,745 crore.[7]
In 2017-18, the Ministry has allocated Rs 1,800 crore towards Air India which is 67% of the Ministry’s total budget for the year.[8] However, this amount is 30% lower than the TAP commitment of Rs 2,587 crore.3 In 2016-17, while Air India had sought and equity infusion of Rs 3,901 crore, the government approved Rs 2,465 crore as the equity infusion.[9] The Standing Committee on Transport, Tourism, and Culture examining the 2017-18 budget estimates noted that reducing the equity infusion in Air India might adversely affect the financial situation of the company.[10] It recommended that the government must allocate the amount committed under TAP. The Ministry had also observed that due to reduction of equity infusion, Air India has to arrange funds through borrowing which costs additional amount of interest to be paid by the government.[11]
As per the Ministry, Air India has achieved most of the targets set out in TAP.[12] Despite running into losses, it achieved an operating profit of Rs 105 crore in FY 2015-16.[13] Air India’s performance in some of the segments are provided in the table below.
Table 1: Air India’s performance
| 2011-12 | 2014-15 | |
| Overall Network On Time Performance (measures adherence to time schedule) | 68.2% | 72.7% |
| Passenger Load Factor (measures capacity utilisation of the airline) | 67.9% | 73.7% |
| Network Yield achieved (in Rs/ RPKM)* | 3.74 | 4.35 |
| Number of Revenue Passengers (in million) | 13.4 | 16.9 |
| Operating Loss (in Rs crore) | 5,139 | 2,171 |
* Note: RPKM or Revenue Passenger Kilometre performed refers to number of seats for which the carrier has earned revenue.
Sources: Lok Sabha Questions; PRS.
The NTDPC had observed that with its excessive and unproductive manpower, failure to invest in the technology required to keep it competitive, and poor operations, Air India’s future looks risky. It had also questioned the rationale for a national airline. It had suggested that the government must frame a decisive policy with regard to Air India, and clarify its future accordingly.5 It had recommended that Air India’s liabilities should be written off and be dealt with separately, and the airline should be run on complete operational and financial autonomy.5
Need for competitive framework in the sector
With the entrance of several private players in the market, the domestic aviation market has grown significantly in the last decade. The market share of an airline is directly related to its capacity share in the market. While private carriers have added capacity in the domestic market, the capacity induction (adding more aircrafts) of Air India has not kept up with the private carriers. This has resulted in decrease in market share of Air India from 17% in 2008-09 to 14% in 2016-17.[14]
The Committee looking at the competitive framework of the civil aviation sector had observed that the national carrier gets preferential treatment through access to government funding, and flying rights.[15] It had recommended that competitive neutrality should be ensured between private carriers and the national carrier, which could be achieved by removing the regulations that provide such preferential treatment to Air India. The NTDPC had also noted that the presence of a state-owned enterprise should not distort the market for other private players.6 It had recommended that the Ministry should consider developing regulations that improve the overall financial health of the airline sector.
While Air India’s performance has improved following the TAP, along with the equity infusion from government, its debt still remains high and has been gradually increasing. In light of this, it remains to be seen what the government will propose with regard to the rejuvenation of the national airline, and ensure a competitive and fair market for all the players in the airline market.
[1] “Govt to prepare Air India revival plan within 3 months, amid calls for privatization”, Livemint, May 31, 2017, http://www.livemint.com/Politics/0koi5Hyidj1gVD3wOWTruM/Govt-says-all-options-open-for-Air-India-revival.html.
[2] “Air India selloff: Fixing airline’s future is more important than past”, Financial Express, May 31, 2017, http://www.financialexpress.com/opinion/why-fixing-air-indias-future-more-important-than-past/693777/.
[3] Lok Sabha Questions, Unstarred question no 382, Ministry of Civil Aviation, February 25, 2016, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=28931&lsno=16.
[4] Lok Sabha Questions, Unstarred question no 353, Ministry of Civil Aviation, November 17, 2016, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=40733&lsno=16.
[5] “Volume 3, Chapter 3: Civil Aviation”, India Transport Report: Moving India to 2032, National Transport Development Policy Committee, June 17, 2014, http://planningcommission.nic.in/sectors/NTDPC/volume3_p1/civil_v3_p1.pdf.
[6] “Government Approves Financial Restructuring and Turn Around Plan of Air India”, Press Information Bureau, Cabinet Committee on Economic Affairs (CCEA), April 12, 2012, http://pib.nic.in/newsite/PrintRelease.aspx?relid=82231.
[7] Lok Sabha Questions, Unstarred question no 472, Ministry of Civil Aviation, April 6, 2017, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=51752&lsno=16.
[8] Notes on Demands for Grants 2017-18, Demand no 9, Ministry of Civil Aviation, http://indiabudget.nic.in/ub2017-18/eb/sbe9.pdf.
[9] Lok Sabha Questions, Unstarred question no 4809, Ministry of Civil Aviation, March 30, 2017, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=51108&lsno=16.
[10] “244th report: Demand for Grants (2017-18) of Ministry of Civil Aviation”, Standing Committee on Transport, Tourism and Culture, March 17, 2017, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Transport,%20Tourism%20and%20Culture/244.pdf.
[11] “218th report: Demand for Grants (2015-16) of Ministry of Civil Aviation”, Standing Committee on Transport, Tourism and Culture, April 28, 2015.
[12] Lok Sabha Questions, Unstarred question no 307, Ministry of Civil Aviation, February 25, 2016, http://164.100.47.190/loksabhaquestions/annex/7/AU307.pdf.
[13] Lok Sabha Questions, Unstarred question no 1566, Ministry of Civil Aviation, March 9, 2017, http://www.loksabha.nic.in/Members/QResult16.aspx?qref=47532.
[14] Lok Sabha Questions, Unstarred question no 312, Ministry of Civil Aviation, March 23, 2017, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=49742&lsno=16.
[15] Report of the Committee Constituted for examination of the recommendations made in the Study Report on Competitive Framework of Civil Aviation Sector in India, Ministry of Civil Aviation, June 2012, http://civilaviation.gov.in/sites/default/files/moca_001870_0.pdf.
The Ministry of Human Resource Development released the draft National Education Policy, 2016 in July this year.[1] The Ministry was receiving comments on the draft policy until the end of September 2016. In this context, we provide an overview of the proposed framework in the draft Policy to address challenges in the education sector. The country’s education policy was last revised in 1992. It outlined equitable access to quality education, with a common educational structure of 10+2+3 years. The draft Policy 2016 aims to create an education system which ensures quality education and learning opportunities for all. The focus areas of intervention of the draft Policy are: (i) access and participation, (ii) quality of education, (iii) curriculum and examination reforms, (iv) teacher development and management and (v) skill development and employability. Through these key interventions, the draft Policy provides a framework for the development of education in the country over the next few years. We discuss the key areas of intervention below.
Access and participation 
Presently in the country, enrolment at pre-school levels for children between the ages of 3- 5 years is low. 38% of children in this age bracket are enrolled in pre-school education in government anganwadi centres, while 27% of the children are not attending any (either government or private) pre-school.[2] In contrast, the enrolment rate in primary education, which is class 1-5, is almost 100%. However, this reduces to 91% in classes 6-8 and 78% in classes 9-12.[3] The trend of lower enrolment rates is seen in higher education (college and university level), where it is at 24%.[4] Due to low enrolment rates after class 5, transition of students from one level to the next is a major challenge. Figure 1 shows the enrolment rates across different education levels. With regard to improving participation of children in pre-school education, the draft Policy aims to start a program for children in the pre-school age group which will be implemented in coordination with the Ministry of Women and Child Development. It also aims to strengthen pre-school education in anganwadis by developing learning materials and training anganwadi workers. Presently, the Right to Education (RTE) Act, 2009 applies to elementary education only. To improve access to education, the draft Policy suggests bringing secondary education under the ambit of the RTE Act. However, a strategy to increase enrolment across different levels of education has not been specified. Quality of education 
A large number of children leave school before passing class eight. In 2013-14, the proportion of students who dropped out from classes 1-8 was 36% and from classes 1-10 was 47%.3 Figure 2 shows the proportion of students who exited the school system in classes 1-8 in 2008-09 and 2013-14. Among the population of children who stay in school, the quality or level of learning is low. The Economic Survey 2015-16 noted that the proportion of class 3 children able to solve simple two-digit subtraction problems fell from 26% in 2013 to 25% in 2014. Similarly, the percentage of class two children who cannot recognize numbers up to 9 increased from 11.3% in 2009 to 19.5% in 2014.[5] To address the issue of learning levels in school going children, the draft Policy proposes that norms for learning outcomes should be developed and applied uniformly to both private and government schools. In addition, it also recommends that the existing no-detention policy (promoting all students of a class to the next class, regardless of academic performance) till class 8 be amended and limited to class 5. At the upper primary stage (class six onward), the system of detention should be restored. Curriculum and examination reforms It has been noted that the current curriculum followed in schools does not help students acquire relevant skills which are essential to become employable. The draft Policy highlights that the assessment practices in the education system focus on rote learning and testing the students’ ability to reproduce content knowledge, rather than on understanding. The draft Policy aims to restructure the present assessment system to ensure a more comprehensive evaluation of students, and plans to include learning outcomes that relate to both scholastic and co-scholastic domains. In order to reduce failure rates in class 10, the Policy proposes to conduct examination for the subjects of mathematics, science and English in class 10 at two levels. The two levels will be part A (at a higher level) and part B (at a lower level). Students who wish to opt for a vocational stream or courses for which mathematics, science and English are not compulsory may opt for part B level examination. Teacher development and management It has been observed that the current teacher education and training programs are inadequate in imparting the requisite skills to teachers. The mismatch between institutional capacity to train teachers and required supply in schools results in a shortage of qualified teachers. At the level of classes 9-12, the Rashtriya Madhyamik Shiksha Abhiyan prescribes a teacher-pupil ratio of 1:30.[6] However, some states have a higher teacher-pupil ratio: Chhattisgarh (1:45), Bihar (1:57) and Jharkhand (1:68).3 In various central universities, the total number of sanctioned teaching posts is 16,339, of which 37% are lying vacant.[7] The draft Policy recommends that state governments should set up independent teacher recruitment commissions to facilitate transparent, merit based recruitment of principals, teachers, and other academic staff. For teacher development, a Teacher Education University should be set up at the national level to focus on teacher education and faculty development. In addition, the draft Policy also states that all teacher education institutes must have mandatory accreditation. To ensure effective teacher management, periodic assessment of teachers in government and private schools should be carried out and linked to their future promotions and increments. Skill development and employability It has been noted that the current institutional arrangements to support technical and vocational education programs for population below 25 years of age is inadequate. The social acceptability of vocational education is also low. Presently, over 62% of the population in the country is in the working age-group (15-59 years).[8] Only 10% of this workforce (7.4 crore) is trained, which includes about 3% who are formally trained and 7% who are informally trained.[9] In developed countries, skilled workforce is between 60-90% of the total workforce.[10] The draft Policy proposes to integrate skill development programs in 25% of schools and higher education institutions in the country. This is in line with the National Skill Development and Entrepreneurship Policy that was released by the government in 2015. The draft Policy 2016 focuses on important aspects that have not been addressed in previous policies such as: (i) curriculum and examination reforms, and (ii) teacher development . Although the Policy sets a framework for improving education in the country, the various implementation strategies that will be put in place to achieve the education outcomes envisaged by it remains to be seen. For an analysis on some education indicators such as enrolment of students, drop-out rates, availability of teachers and share of government and private schools, please see our Vital Stats on the ‘overview of the education sector’ here. [1] Some Inputs for Draft National Education Policy 2016, Ministry of Human Resource Development, http://mhrd.gov.in/sites/upload_files/mhrd/files/Inputs_Draft_NEP_2016.pdf. [2] Rapid Survey on Children, 2013-14, Ministry of Women & Child Development, Government of India, http://wcd.nic.in/sites/default/files/RSOC%20FACT%20SHEETS%20Final.pdf. [3] Secondary education in India, U-DISE 2014-15, National University of Educational Planning and Administration, http://www.dise.in/Downloads/Publications/Documents/SecondaryFlash%20Statistics-2014-15.pdf. [4] All India Survey on Higher Education 2014-15, http://aishe.nic.in/aishe/viewDocument.action?documentId=197. [5] Economic Survey 2015-16, Volume-2, http://indiabudget.nic.in/es2015-16/echapvol2-09.pdf. [6] Overview, Rashtriya Madhyamik Shiksha Abhiyan, Ministry of Human Resource Development, http://mhrd.gov.in/rmsa. [7] “265th Report: Demands for Grants (Demand No. 60) of the Department of Higher Education”, Standing Committee on Human Resource Development, April 2013, 2015, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20HRD/265.pdf. [8] “Ministry of Skill Development and Entrepreneurship: Key Achievements and Success Stories in 2015”, Ministry of Skill Development and Entrepreneurship, Press Information Bureau, December 15, 2015. [9] Draft Report of the Sub-Group of Chief Ministers on Skill Development, NITI Aayog, September 2015, http://niti.gov.in/mgov_file/Final%20report%20%20of%20Sub-Group%20Report%20on%20Skill%20Development.pdf. [10] Economic Survey 2014-15, Volume 2, http://indiabudget.nic.in/es2014-15/echapter-vol2.pdf.
