Turbulence ahead

CERTAIN RECENT DEVELOPMENTS concerning the country's international airline, Air India (AI), are disquieting. On May 23 the airline's Managing Director, Mr. Michael Mascarenhas, was suspended over some irregularities he along with a few senior AI executives had allegedly committed almost four years earlier. While senior executives of India's still considerable public sector should not be - and are obviously not - immune from vigilance enquiries and so on, the manner in which Mr. Mascarenhas's case was handled appears that there is more to it than meets the eye. There had been reports that the relations between Mr. Mascarenhas and the Civil Aviation Minister, Mr. Sharad Yadav, have not been smooth for a while. Far from being a mere interpersonal problem, it has been reported, that they differed on such weighty matters as privatising the airline and on top level personnel policies for the airline.

Two observations are immediately relevant. That all public sector units lack functional autonomy is well-known and that has been proved yet again. The Civil Aviation Ministry especially has kept a stranglehold over the two government-owned airlines, sometimes posting its own bureaucrats and other inexperienced people to run them. In other crucial matters too, as, for instance, the aviation policy relating to new entrants or foreign direct investment, there has been considerable opaqueness in the Ministry's functioning.

The second noteworthy aspect is the striking demonstration yet again of the ham-handed vigilance machinery that is peculiar to the Indian public sector and bureaucracy. Air India's former MD has been charged with authorising extra commission to one of the overseas sales agents by allegedly manipulating estimates of market share and so on. Matters such as those - financial derivatives going wrong in a public sector institution or a government owned oil company exceeding its discretionary powers in writing oil futures - are best left to experts preferably in the respective companies or, if that is not possible, to an outside body of experts. The vigilance system for the public sector as it has evolved in this country works against the commercial character of the enterprises and inhibits decision- making. Nor can it lay claim to aid management decisions by sprucing up the preventive vigilance aspects. Moreover, by its very nature the vigilance machinery tramples upon the individual board's jurisdiction and make public sector managers wary of taking risks.

For Air India, whose image is already severely dented, the latest crisis in its top management could not have come at a worse time. The airline is a candidate for privatisation with the preliminary steps in the long drawn-out process having already been completed. Adding to its woes, and most certainly to its negative valuation, is the Government's decision to sell ``bilaterals'' - the routes which a national carrier can fly under agreements between two countries - to other airlines. This controversial move, just ahead of the airline's privatisation, might deliver short-term gains but will incapacitate the airline over the medium term. For an airline which has several dubious distinctions such as being the lowest in productivity, and possessing an overaged and grossly inadequate fleet, the only tangible assets would be the landing rights conferred by the bilateral arrangements. Potential bidders in the airline's strategic sale are already down to a trickle. It is doubtful whether there would be any worthwhile bids. Most certainly, therefore, Air India's strategic sale will face far greater hurdles than even the highly charged BALCO's. It would be naive to treat the latest developments in AI merely as another example of a mismanaged government commercial enterprise going out of control.

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