Air India, BSNL: A story of turnaround

Prime Minister Narendra Modi had singled out BSNL and Air India for special mention about the turnaround in their fortunes in his Independence Day broadcast. This is the good news because just a few months ago the aviation minister, Ashok Gajapathi Raju, had said that even if Air India was put on sale there would be no buyers because of its huge losses. And if the government wants to, in the long run, sell off its stake in Air India it will have to make the airline profitable.

The airline has legacy issues with the aviation ministry during UPA’s term, recklessly ordering expensive aircraft in numbers that were not needed. As a result, the airline incurred heavy losses. The credit for Air India making an operational profit of Rs 100 crores (unaudited) must go to the Prime Minister and Mr Raju, who have been acting literally like guardian ministers of Air India along with AI’s chairman and managing director Ashwin Lohani.

The national carrier has improved its on-time performance and if a flight is 30 minutes behind schedule the airline has to report the specific details for delay to Mr Raju and if delay is beyond an hour they have to give an explanation. According to people in the know, the PMO also closely monitors Air India’s progress as it pumps in thousands of crores into the airline from time to time. Unions too have been told that strikes will not be tolerated and Mr Lohani, being a man from the corporate sector and not a bureaucrat, has a better rapport with the unions.

However, the airline still has a challenge to become profitable as it has a debt burden of Rs 52,000 crores and its servicing sees an outgo of around Rs 5,800 crores per annum. In 2014-15 it incurred a loss of Rs 5,859.91 crores.

In the case of BSNL it expects to earn a revenue of Rs 30,000 crores in 2015-16, and made an operating profit of Rs 670 crores in 2014-15. It showed an operating profit of Rs 672 crores in FY 2014-15 from an operating loss of Rs 691 crores in FY 2013-14.

Interestingly the Telecom Watchdog says that the BSNL’s operating profit was due to an advance of Rs 720 crores in 2003 from the department of telecommunications being waived off in 2014-15. It also alleges that the telecom minister’s actions have not benefited BSNL and has given a private telecom company an advantage. If this is true then it needs to be looked into. Both BSNL and Air India will have to get back into making profits and not just operational profits to be strong PSUs. Perhaps, the PMO should also mentor the operations of BSNL as it does in the case of Air India.