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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.
As of April 26, Rajasthan has 2,083 confirmed cases of COVID-19 (fifth highest in the country), of which 493 have recovered and 33 have died. On March 18, the Rajasthan government had declared a state-wide curfew till March 31, to check the spread of the disease. A nation-wide lockdown has also been in place since March 25 and is currently, extended up to May 3. The state has announced several policy decisions to prevent the spread of the virus and provide relief for those affected by it. This blog summarises the key policy measures taken by the Government of Rajasthan in response to the COVID-19 pandemic.
Early measures for containment
Between late January and early February, Rajasthan Government’s measures were aimed towards identification, screening and testing, and constant monitoring of passenger arrivals from China. Instructions were also issued to district health officials for various prevention, treatment, & control related activities, such as (i) mandatory 28-day home isolation for all travellers from China, (ii) running awareness campaigns, and (iii) ensuring adequate supplies of Personal Protection Equipments (PPEs). Some of the other measures, taken prior to the state-wide lockdown, are summarised below:
Administrative measures
The government announced the formation of Rapid Response Teams (RRTs), at the medical college-level and at district-level on March 3 and 5, respectively.
The District Collector was appointed as the Nodal Officer for all COVID-19 containment activities. Control Rooms were to be opened at all Sub-divisional offices. The concerned officers were also directed to strengthen information dissemination mechanisms and tackle the menace of fake news.
Directives were issued on March 11 to rural health workers/officials to report for duty on Gazetted holidays. Further, government departments were shut down between March 22 and March 31. Only essential departments such as Health Services were allowed to function on a rotation basis at 50% capacity and special / emergency leaves were permitted.
Travel and Movement
Air travellers were to undergo 14-day home isolation and were also required to provide an undertaking for the same. Besides, those violating the mandated isolation/quarantine were liable to be punished under Section. 188 of the Indian Penal Code. Penalties are imposed under this section on persons for the willful violation of orders that have been duly passed by a public servant.
All institutions and establishments, such as (i) educational institutions, theatres, and gyms, (ii) anganwadis, (iii) bars, discos, libraries, restaurants etc, (iv) museums and tourist places, were directed to be shut down till March 31.
The daily Jan Sunwai at the Chief Minister’s residence was cancelled until further notice. Various government offices were directed to shut down and exams of schools and colleges were postponed.
On March 24, the government issued a state-wide ban on the movement of private vehicles till March 31.
Health Measures
Advisories regarding prevention and control measures were issued to: (i) District Collectors, regarding sample collection and transportation, hotels, and preparedness of hospitals, (ii) Police department, to stop using breath analysers, (iii) Private hospitals, regarding preparedness and monitoring activities, and (iv) Temple trusts, to disinfect their premises with chemicals.
The government issued Standard Operating Procedures for conducting mock drills in emergency response handling of COVID-19 cases. Training and capacity building measures were also initiated for (i) Railways, Army personnel etc and (ii) ASHA workers, through video conferencing.
A model micro-plan for containing local transmission of COVID was released. Key features of the plan include: (i) identification and mapping of affected areas, (ii) activities for prevention control, surveillance, and contact tracing, (iii) human resource management, including roles and responsibilities, (iv) various infrastructural and logistical support, such as hospitals, labs etc, and (v) communication and data management.
Resource Management: Private hospitals and medical colleges were instructed to reserve 25 % of beds for COVID-19 patients. They were also instructed to utilise faculty from the departments of Preventive and Social Medicine to conduct health education and awareness activities.
Over 6000 Students of nursing schools were employed in assisting the health department to conduct screening activities being conducted at public places, railways stations, bus stands etc.
Further, the government issued guidelines to ensure the rational use of PPEs.
Welfare Measures
The government announced financial assistance, in the form of encouragement grants, to health professionals engaged in treating COVID-19 patients.
Steps were also taken by the government to ensure speedy disbursal of pensions for February and March.
The government also initiated the replacement of the biometric authentication with an OTP process for distribution of ration via the Public Distribution System (PDS).
During the lockdown
State-wide curfew announced on March 18 has been followed by a nation-wide lockdown between March 25 and May 3. However, certain relaxations have been recommended by the state government from April 21 onwards. Some of the key measures undertaken during the lockdown period are:
Administrative Measures
Advisory groups and task forces were set up on – (i) COVID-19 prevention, (ii) Health and Economy, and (iii) Higher education. These groups will provide advice on the way forward for (i) prevention and containment activities, (ii) post-lockdown strategies and strategies to revive the economy, and (iii) to address the challenges facing the higher education sector respectively.
Services of retiring medical and paramedical professionals retiring between March and August have been extended till September 2020.
Essential Goods and Services
A Drug Supply Control Room was set up at the Rajasthan Pharmacy Council. This is to ensure uninterrupted supply of medicines during the lockdown and will also assist in facilitating home delivery of medicines.
The government permitted Fair Price Shops to sell products such as masalas, sanitisers, and hygiene products, in addition to food grains.
Village service cooperatives were declared as secondary markets to facilitate farmers to sell their produce near their own fields/villages during the lockdown.
A Whatsapp helpline was also set up for complaints regarding hoarding, black marketing, and overpricing.
Travel and Movement
Once lockdown was in place, the government issued instructions to identify, screen, and categorise people from other states who have travelled to Rajasthan. They were to be categorised into: (i) people displaying symptoms to be put in isolation wards, (ii) people over 60 years of age with symptoms and co-morbidities to be put in quarantine centres, and (iii) asymptomatic people to be home quarantined.
On March 28, the government announced the availability of buses to transport people during the lockdown. Further, stranded students in Kota were allowed to return to their respective states.
On April 2, a portal and a helpline were launched to help stranded foreign tourists and NRIs.
On April 11, an e-pass facility was launched for movement of people and vehicles.
Health Measures
To identify COVID-19 patients, district officials were instructed to monitor people with ARI/URI/Pneumonia or other breathing difficulties coming into hospital OPDs. Pharmacists were also instructed to not issue medicines for cold/cough without prescriptions.
A mobile app – Raj COVID Info – was developed by the government for tracking of quarantined people. Quarantined persons are required to send their selfie clicks at regular intervals, failing which a notification would be sent by the app. The app also provides a lot of information on COVID-19, such as the number of cases, and press releases by the government.
Due to the lockdown, people had restricted access to hospitals and treatment. Thus, instructions were issued to utilise Mobile Medical Vans for treatment/screening and also as mobile OPDs.
On April 20, a detailed action plan for prevention and control of COVID-19 was released. The report recommended: (i) preparation of a containment plan, (ii) formation of RRTs, (iii) testing protocols, (iv) setting up of control room and helpline, (v) designated quarantine centres and COVID-19 hospitals, (vi) roles and responsibilities, and (vii) other logistics.
Welfare Measures
The government issued instructions to make medicines available free of cost to senior citizens and other patients with chronic illnesses through the Chief Minister’s Free Medicine Scheme.
Rs 60 crore was allotted to Panchayati Raj Institutions to purchase PPEs and for other prevention activities.
A one-time cash transfer of Rs 1000 to over 15 lakh construction workers was announced. Similar cash transfer of Rs 1000 was announced for poor people who were deprived of livelihood during the lockdown, particularly those people with no social security benefits. Eligible families would be selected through the Aadhaar database. Further, an additional cash transfer of Rs 1500 to needy eligible families from different categories was announced.
The state also announced an aid of Rs 50 lakh to the families of frontline workers who lose their lives due to COVID-19.
To maintain social distancing, the government will conduct a door-to-door distribution of ration to select beneficiaries in rural areas of the state. The government also announced the distribution of free wheat for April, May, and June, under the National Food Security Act, 2013. Ration will also be distributed to stranded migrant families from Pakistan, living in the state.
The government announced free tractor & farming equipment on rent in tie-up with farming equipment manufacturers to assist economically weak small & marginal farmers.
Other Measures
Education: Project SMILE was launched to connect students and teachers online during the lockdown. Study material would be sent through specially formed Whatsapp groups. For each subject, 30-40 minute content videos have been prepared by the Education Department.
Industry: On April 18, new guidelines were issued for industries and enterprises to resume operations from April 20 onwards. Industries located in rural areas or export units / SEZs in municipal areas where accommodation facilities for workers are present, are allowed to function. Factories have been permitted to increase the working hours from 8 hours to 12 hours per day, to reduce the requirement of workers in factories. This exemption has been allowed for the next three months for factories operating at 60% to 65% of manpower capacity.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.
