Disinvestment of PSUs – An Indian Case Study of Air India

Suseela Sarma L and Rao PS

Published on: 2019-04-30


In India, PSUs were created post Independence to build a self-reliant, state-led economy. Through the 1970s, amid a nationalisation drive, PSUs dominated the economic landscape before a bankrupt government was forced to rethink its strategy post liberalisation. PSUs are a necessity in areas where government has a natural monopoly; like railways, metro rail, utilities or sensitive areas like satellite or nuclear power. In a rapidly evolving world, there should be a model of constant review of the PSU portfolio - what to retain and what to divest. Distortions come into play when a PSU is expected to perform on similar lines as private sector units yet is deprived of management autonomy. Between 1980 and the turn of the century, the focus shifted to a wave of PSU reforms that included minority stake sales, listings and overhauls of PSU management.

Different phases of Disinvestment in India through various Governments.

  • 1991-92 to 1995-96
  • 1996-97 to 1997-98
  • 1998-99 to 2007-2008
  • 2009 to 2014
  • Present Policy – 2014 onwards

The article basically tries to assess the performance and the necessity of divesting one of the major PSUs – Air India – which has not been giving any returns on the finances pumped into it at the expense of other vital social needs. Various governments in the past decade have been trying to reverse the negative trend, but failed. So finally it was a bold step in the right direction, but with certain unattractive offer ratios due to which there has not been any offers from private investors.