Context: Recently, the government announced its decision to sell all its stake in Air India (AI) as well as AI’s stake in two other businesses — Air India Express Ltd (AIXL) and Air India SATS Airport Services Pvt Ltd (AISATS).
Key Points

• Government approved the highest price bid of Talace Pvt Ltd, a wholly owned subsidiary of Tata Sons Pvt. Ltd for sale (Disinvesting) of 100% equity shareholding of Government of India in Air India (AI).
• Which means  Tatas will own 100% stake in AI, as also 100% in its international low-cost arm Air India Express and 50% in the ground handling joint venture, AI SATS.

Why is the selling of Air India being considered a landmark? 

• The process was a labour of nine months for officers in the Union Finance Ministry who encountered multiple obstacles, and had to shed the “over-conservatism” that is typical of bureaucracy.
• This time the government had kept itself open in terms of what the bidding parameters would be, which is why there were so many changes to the conditions throughout the process.
• No one among the Opposition Congress and the Left — a traditional opponent of privatisation — has so far reacted unfavourably. 

Reasons for Disinvestment

• It is hoped that with AI passing into the private sector, its operations and costs will get streamlined, services on board will improve and basic services like wi-fi will also be made available.
• A strong international carrier in India will give a boost to the large airports built in Delhi, Hyderabad, Mumbai and Bengaluru which along with AI will be able to win back some of the tourist dollars from Indians travelling abroad who are currently travelling on foreign carriers.
• A successful turnaround of Air India could also help the Indian economy as it is a well-established fact that aviation has a multiplier effect on the economy.
• There is a pressure on the government to raise resources to support the economic recovery and meet expectations of higher outlays for healthcare.

Significance

• It will save taxpayers money from paying for daily losses of AI.
• It will help push other tough decisions the government is keen on taking.
• It will possibly give the option of flying one more low-cost carrier domestically.

Issues with Disinvestment

Loss of Regular Income

• The Sale of profit-making and dividend-paying PSUs would result in the loss of regular income to the Government. 

Ignoring Reforms

• It has become just a resource raising exercise by the government. 
• There is no emphasis on reforming PSUs.

Culture of Inefficiency

• The valuation of shares has been affected by the government’s decision not to reduce government holdings below 51 percent. 
• With the continuing majority ownership of the government, the public enterprises would continue to operate with the earlier culture of inefficiency.

Bureaucratic Control

• The process of disinvestment is suffering from bureaucratic control. Almost all processes starting from conception to the selection of bidders are suffering due to it. 
• Moreover, bureaucrats are reluctant to take timely decisions in the fear of prosecution after retirement.

Social Insecurity

• Disinvestment affects labour forces' social security.

Risk to National Security

• Strategic Disinvestment of Oil PSUs is seen by some experts as a threat to National Security. 
• Oil is a strategic natural resource and possible ownership in the foreign hand is not consistent with our strategic goals. For example, disinvesting Bharat Petroleum Corporation Limited (BPCL).

Private Monopoly

• Complete Privatization may result in public monopolies becoming private monopolies, which would then exploit their position to increase costs of various services and earn higher profits

Funding Fiscal Deficit is Unhealthy

• Using funds from disinvestment to bridge the fiscal deficit is an unhealthy and short-term practice. 
• It is said that it is the equivalent of selling ‘family silver’ to meet short term monetary requirements.