Blog

Daily Current Affairs 07.08.2020 (RBI, Air India, Academic Research)

Daily Current Affairs 07.08.2020 (RBI, Air India, Academic Research)

1. RBI keeps key policy rates unchanged

It allows banks to restructure corporate, individual loans

  • The Reserve Bank of India kept its powder dry in the third review of the monetary policy since the COVID-19 pandemic spread in the country, leaving key policy rates unchanged in the face of rising inflation pressures but asserted that propping up economic recovery has assumed “primacy” in the “worst peace-time health and economic crisis of the last 100 years”.
  • The central bank didn’t extend the moratorium on loan repayments offered to borrowers beyond August 31 but allowed banks to restructure loans from large corporates, micro, small and medium enterprises as well as individuals to help stem the rising stress on incomes and balance sheets.
  • These restructuring efforts may or may not include a moratorium on instalment repayments, the RBI said, leaving the decision to banks, with an eye on averting such loans from slipping into non-performing assets.
  • “A large number of firms that otherwise maintain a good track record under existing promoters face the challenge of their debt burden becoming disproportionate, relative to their cash flow generation abilities. This can potentially impact their long-term viability and pose significant financial stability risks if it becomes widespread,” RBI Governor Shaktikanta Das said after a three-day meeting of the Monetary Policy Committee.
  • With incomes and jobs taking a hit across sectors, the RBI has allowed banks to restructure individual borrowers’ loans by December 31, 2020, permitting a maximum extension of two years. Limits for loans against gold were also enhanced.
  • India’s GDP is set to contract in 2020-21, and inflation remains a bugbear, thanks to supply chain disruptions across sectors along with a sticky surge in food prices. Consumer confidence turned more pessimistic in July than previous surveys by the RBI, so demand is expected to remain anaemic, Mr. Das said.
  • “While space for further monetary policy action is available, it is important to use it judiciously to maximise the beneficial effects for underlying economic activity,” he added.

The Monetary Policy Committee (MPC)

Monetary Policy Committee (MPC) constituted by the Central Government as per the Section 45ZB of the amended RBI Act, 1934. The first meeting of the MPC was held on October 3 and 4, 2016. This committee decides various policy rates like Repo rate, Reverse repo rate, MSF and Liquidity Adjustment Facility etc.

Monetary Policy Committee (MPC) is a 6 member committee formed after the amendment in the RBI Act, 1934 through the Finance Act, 2016. The basic objective of MPC is to maintain price stability and accelerate the growth rate of the economy.

What is Monetary Policy

Monetary policy refers to the policy of the Reserve Bank of India with regard to the use of monetary instruments under its control to achieve the goals of GDP growth and lower inflation rate. The RBI is authorised to made monetary policy under the Reserve Bank of India Act, 1934.

Hence monetary policy refers to the credit control measures adopted by the Central Bank of a country.

Objectives of the Monetary Policy:

The Chakravarty committee has emphasized that price stability, economic growth, equity, social justice, promoting and nurturing the new monetary and financial institutions have been important objectives of the monetary policy in India.

RBI tries always tries to reduce rate of inflation or keep it within a sustainable limit while on the other hand government of India focus to accelerate the GDP growth of the country.

Structure of Banking Sector in India

What is Monetary Policy Committee?

The Monetary Policy Committee (MPC) constituted by the Central Government under Section 45ZB. The MPC determines the policy interest rate required to achieve the inflation target.

The Reserve Bank’s Monetary Policy Department (MPD) assists the Monetary Policy Committee (MPC) in forming the monetary policy. The Monetary Policy Committee determines the policy rates required to achieve the inflation target.

Composition of Monetary Policy Committee

The 6 member Monetary Policy Committee (MPC) constituted by the Central Government as per the Section 45ZB of the amended RBI Act, 1934. The first meeting of the Monetary Policy Committee (MPC) was held on in Mumbai on October 3, 2016.

The composition of the MPC as on April 2019 is as follows;

1. Governor of the Reserve Bank of India – Chairperson, ex officio; (Shri Shaktikanta Das)

2. Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy –

BP Kanungo (Member, ex officio)

3. One officer of the Reserve Bank of India to be nominated by the Central Board – Member, ex officio; (Dr. Michael Debabrata Patra)

4. Dr. Ravindra H. Dholakia, Professor, Indian Institute of Management, Ahmedabad – Member

5. Professor Pami Dua, Director, Delhi School of Economics – Member

6. Shri Chetan Ghate, Professor, Indian Statistical Institute (ISI) – Member

Except ex-officio members all members will hold the office for a period of 4 years or until further orders, whichever is earlier.

Instruments of Monetary Policy;

The instruments of monetary policy are of two types:

1. Quantitative Instruments: General or indirect (Cash Reserve Ratio, Statutory Liquidity Ratio, Open Market Operations, Bank Rate, Repo Rate, Reverse Repo Rate, Marginal standing facility and Liquidity Adjustment Facility (LAF))

2. Qualitative Instruments: Selective or direct (change in the margin money, direct action, moral suasion)

Description: C:\Users\DELL\Desktop\daily market\the  hindu\august\07.08.2020\1.PNG

2. Academic research is necessary, but not sufficient

Investment in research can translate into national development only through pursuit of post-academic research

  • The Government of India is in the process of revisiting the Science, Technology and Innovation (STI) Policy. The policy will guide the agencies of the government mandated with funding research in higher education institutions and national laboratories. At this stage we need to ponder the question: what kind of research should be funded? That leads one to look at the nomenclature used by researchers for this purpose. Here it is pertinent to recall what William Shockley said in his Nobel lecture in 1956, that words like “pure, applied, unrestricted, fundamental, basic, academic, industrial, practical etc.” are being used frequently “in a derogatory sense, on the one hand to belittle practical objectives of producing something useful and, on the other hand, to brush off the possible long-range value of explorations into new areas where a useful outcome cannot be foreseen.”

Alternate frameworks

  • Experts in science and technology studies have come up with alternate frameworks and terminology to provide a comprehensive picture and avoid any value judgement. One approach was proposed by NASA in the form of Technology Readiness Levels (TRL), a type of measurement system used to assess the maturity level of a particular technology. TRL-1 corresponds to observation of basic principles. Its result is publications. TRL-2 corresponds to formulation of technology at the level of concepts. Then the TRL framework advances to proof of concept, validation in a laboratory environment, followed by a relevant environment, and then to prototype demonstration, and ending with actual deployment. The framework uses terms as applicable to aerospace applications, but one can come up with alternate terms depending on the field of application, including health sciences where the term ‘translational research’ is commonly used. The number of levels can also be adjusted to suit the application.
  • An alternative is to use the terminology ‘Academic Research (AR)’, and ‘Post-Academic Research (PAR)’. One can easily establish correspondence with the TRL framework, with AR corresponding to TRL-1 and the rest to higher levels. To provide some granularity, one can divide PAR into early-stage PAR, and late-stage PAR. Late-stage PAR has to be done by large laboratories (national or those supported by industry), while AR and early-stage PAR can be done at higher education institutions and large laboratories.
  • Both AR and PAR generate knowledge which is necessary for national development. When examined from the perspective of national development, pursuit of AR alone, while necessary, is not sufficient. AR and PAR when pursued together and taken to their logical conclusion will result in a product or a process, or a better clinical practice, or a scientifically robust understanding of human health and disease, or provide inputs for a policy decision.
  • It is often said that India’s investment in research is lower than that by advanced countries. Here two observations need consideration. First, countries belonging to the Organisation for Economic Cooperation and Development (OECD) report research statistics according to the Frascati Manual, which was first drafted in 1963, and has gone through five revisions since then. We cannot compare data with other countries without having correspondence between India’s data and data reported by others. Second, India has to decide where to increase investment: in AR or in PAR. Investment in research can translate into national development only through pursuit of PAR.
  • This is not a call for abandoning AR, but a call to look for useful outcomes including via spin-offs and serendipity, and to prioritise research in areas that relate to national development.
  • During my talks with academics on this topic, some observed that our industry has not reached a stage where they can absorb research being done by higher education institutions. This observation reveals that research being pursued is either not addressing national needs or is limited to AR. The lukewarm response of industry is a message for academia to orient its priorities to address national needs and engage in both AR and early-stage PAR and provide inputs necessary to raise the technology intensity of industry.

Pursuing AR and PAR

  • One can cite several examples to illustrate how AR and PAR can be pursued together. A programme in high energy physics can be designed to pursue accelerator technology along with high energy physics. Research in electro-chemistry can be accompanied by development of battery technologies.
  • Judging the growth of S&T based only on publications provides an incomplete picture. Why is it that industries that have high technology intensity, such as aircraft and spacecraft, medical, precision and optical instruments, and communication equipment, have a low presence in India? What should be done to increase value addition to raw materials in India? The answer lies in increasing the technology intensity of industry, which was identified as one of the goals of the STI policy issued in 2013. This needs reiteration and a mechanism should be devised to monitor progress with the objective of becoming an ‘Atmanirbhar Bharat’.
  • The STI policy should emphasise PAR to ensure that investment in research results in economic growth. To motivate the research community to pursue at least early-stage PAR, the reward system needs significant reorientation. The current system for rewards relies heavily on bibliometric indicators despite the knowledge that publications alone do not lead to national development. The reward system in higher education institutions and national laboratories should be reoriented to promote PAR. Academics in higher education institutions pursuing AR should pursue early-stage PAR themselves, or team up with those who are keen to pursue PAR.
  • In short, academic research is necessary, but not sufficient.
  • R.B. Grover is Emeritus Professor, Homi Bhabha National Institute, and Member, Atomic Energy Commission

3. Can the NEP fix access to universal education?

There are concerns that the policy abandons the state’s commitments under the RTE Act

  • The new National Education Policy (NEP), approved by the Union Cabinet last week, seeks to align itself with the Sustainable Development Goal of ensuring inclusive and equitable quality education for all in the next 20 years. The policy has brought into its ambit children in the age group of 3 to 18 years. Leena Chandran Wadia and Anita Rampal share their thoughts in a discussion moderated by D. Suresh Kumar. Excerpts:
  • Is the NEP’s 10-year deadline, to make all children entering Grade 1 school-ready through Early Childhood Care and Education, practical?
  • Leena Chandran Wadia (LCW): I think we have to be ready because every year that we lose, we lose some children. You know, at the time that their brain is developing fast and they can learn a lot, we must help them learn as much as possible. So that is a deadline we must try to meet.
  • Anita Rampal (AR): Since April 1, 2010, we have a Right to Education Act making it a fundamental right of every child aged between 6 and 14 years to get free and compulsory education, in a neighbourhood school. This has been a fundamental right for the last 10 years. So there is no question of having a target of another 10 years. What this policy is doing is, it is very quietly, very problematically, going back on a fundamental right of a child, enacted by law.

With the NEP silent on last year’s draft proposal to expand the RTE Act’s scope to cover children from 3 to 18 years, can universal education be attained?

  • LCW: So I saw that too. And I am a little surprised… but the document does say that it wants to achieve universalisation of education. So, we have to wait and see until the implementation plan comes on how they propose to deliver on what they claim they want to do, which is universalise education between 3 and 18 years… this move to actually bring children into sort of formal education fold at age three, had a timeline because there are lots of practical issues with the anganwadis and preschools. But it doesn’t take away from the rights embodied in the RTE Act, which begins at age 6, which we felt was too late.
  • AR: It [NEP] is clearly trying to abandon that [RTE] Act. It says it is not going to have a regular schooling with well-qualified teachers. This policy is saying we will be allowing open schooling. This clubbing of three years of ECCE with Grade 1 and 2 of primary school and then calling this a ‘foundational literacy and numeracy mission’, it is so worrying because we know that an anganwadi [worker] is not professionally trained to be a teacher. Can we believe it that a national policy says children will become tutors for others in their classes? It is very clear that it is really trying to abandon its responsibility of even providing a good, professional teacher for the earliest years.
  • The policy says education is a public service, but also advocates philanthropic private participation…
  • LCW: I would like to underline that all existing resources should be pressed into service to ensure that every child gets quality early childhood care. The anganwadi workers score a lot because they are actually, sort of, replacing the parents of the children. And so that is alright as a way to begin teaching the children… The NEP committee members were completely clear that the policy’s focus has to be that government education is of very high quality. This is the only way we will make sure every child, no matter where they are, are given education. It is very unlikely that the private sector is going to open schools in remote areas with less than 10 children. The only hope is to strengthen the government education system. But, of course, we are not going to stand in the way of private education. In the last 25 years, we have had nearly 50% private school education and nearly 70% of enrollment in higher education in private hands. The concern is there are too many players who are not of good quality. We have to find a way to weed them out. Everywhere in the world, it is usually philanthropy, private sector that participates in education. What we have in India is a lot of people under the umbrella of not for profit really working for profit… [To] filter them out, we have made some suggestions.
  • What about concerns on the proposal to create school complexes? The Kothari Commission recommended it.
  • AR: Kothari Commission spoke about a ‘school complex’ to have a collaborative synergy between high or higher secondary schools, which normally are better resourced, and the smaller neighbourhood and primary schools, which actually then become feeder schools for the high school. That word is being used now in a completely different sense. Here we know the background… 14,000 schools in one State have been closed under the name of consolidation, saying that small schools are sub-optimal.
  • So, schools which actually provide access in the proximity of the child, within the community; those have been closed or merged. NEP says we should have larger institutions, right up to higher education, have a college which has 2,500 students. So it is trying to make an economic argument of viability. This is playing with the child’s right. How can you expect that this will be considered as access?
  • The proposed 5+3+3+4 school structure has triggered apprehension that it could lead to exits at each stage…
  • LCW: This is a pedagogical alignment, where we would like to assess students at Grade 3, 5 and 8 to make sure that they have attained the outcomes designed for them. This is an attempt to refocus attention on learning outcomes at different stages. In fact, we think there is also provision to make sure that the biggest dropouts that start to happen from beyond Grade 5 are halted.

The NEP advocates equitable and inclusive education but there is no mention of a common school curriculum. Even the proposal to impart education in the mother tongue is open-ended. Wouldn’t these broaden inequities?

  • LCW: State governments have actually decided that teaching will happen in the regional language, which is, for instance, Kannada in Karnataka, ignoring that there are large swathes of areas on the borders of Maharashtra, where children speak Marathi; on the Andhra Pradesh border, where children speak Telugu, etc. It should be possible for a school in a certain community to teach students in the dominant language. But there is another problem as State governments transfer teachers. You hire somebody from Bengaluru and post them at the Maharashtra border and the children are listening to Kannada, which is a foreign language. So, when they don’t attain foundational literacy and numeracy, it is because they are also struggling with the language. The whole idea is to try to get State governments to allow local schools to teach in their own language by hiring local teachers. How far we will succeed remains to be seen, because education is [also] a State subject. As for the common school curriculum, the discussion about different boards was there [in the NEP committee]. There is an exodus towards CBSE boards in many States but that is partially because the State boards are quite weak. This policy has tried to strengthen SCERTs so that they can attend to children’s need to be educated within their own context and culture. We need to open up that opportunity so that children can relate to their real life through their education. That is the reason we have let the various boards be.

Will the thrust on vocational education weaken students academically, perpetuate hereditary occupations or lead to early exits?

  • AR: The notion of vocational education as something which is only preparing you for vocations should not be pushed early in school. From the first Radhakrishnan Commission right down, our [Education] Commissions have said let’s not have different statuses for different kinds of programmes and instead give students a chance to study together. Our vocational education has no education in it. It is skill-based and based on hierarchy between knowledge for some and skill for the others depending on this constructed version of what is ‘ability’. This needs to be really questioned, because we already have many hierarchies within our system. This clubbing together of Grades 9, 10, 11 and 12 is extremely worrying and problematic because it says that you will be given vocational courses. Instead of sorting children out, give them a choice to be together and support them right through that. There will be a lot of dropping out, pushing them away into vocational courses or open school.

With such sweeping school reforms, is a National Testing Agency needed to assess students for university admissions?

  • LCW: This was debated a lot. The policy is very clear about where we would like to go. So many things are being dismantled, so many new attitudes and mindsets need to be built. The interim is going to be very difficult and most parents are anxious about the handful of so-called good opportunities that they have a perception for, like IITs. And so there are insane levels of competition. We felt it is better that only the people who want to try for JEE, for example, need to study for that entrance exam. The rest in school can be liberated to experiment with so many other of their interests. Also, higher education institutions are going to have some autonomy in deciding who they admit, which again, makes parents nervous. So, if at least some percentage of scores can be used for admission through the NTA then there will be a sense that there is at least an attempt to provide a partial level-playing field till such time that some trust is built in the system. Instead of trying to examine every child through an exit exam in Grades 10 and 12, it is better to introduce an entrance exam.

Does the NEP’s broad categorisation of Socio-Economically Disadvantaged Group (SEDG), hamper equity?

  • AR: I totally agree… disadvantage just doesn’t come from the air. It is historical, it is social. That is the way identities have been shaped with declarations of exclusion. Clubbing everyone under ‘SEDG’, shying away from saying ‘Dalit’ or ‘minority’ will not really get us to even acknowledge what the issue is. This is sort of glossing over it. We have to understand what ‘caste’ is. And what does it mean when we say that a child is from the Muslim community? How does a child fare within the system? How do the others look at this child? What are the backgrounds of this child? Trying to understand the diverse social realities, disadvantages and exclusion is key.
Description: C:\Users\DELL\Desktop\daily market\the  hindu\august\07.08.2020\3.PNG

4. India rejects China’s UNSC move on Kashmir

Country reiterates Kashmir is a domestic issue

  • A day after China prompted the United Nations Security Council (UNSC) to discuss the Kashmir issue in a closed-door meeting, India “firmly” rejected the Chinese initiative and reiterated that Kashmir is a domestic issue. Veteran diplomats demanded that South Block launch a campaign to remove Kashmir from the agenda of the council.
  • “As on previous occasions, this attempt too met with little support from the international community. We firmly reject China’s interference in our internal affairs and urge it to draw proper conclusions from such infructuous attempts,” the External Affairs Ministry said in a press statement.
  • The Chinese move came on the first anniversary of the dilution of Article 370, which led to the creation of the Union Territories of Jammu & Kashmir and Ladakh and ended the special status for the region. China initiated a similar move on August 16 last year when it revived “The India-Pakistan Question” at the UNSC. The issue had not been taken up at the council since it last figured in the world body before the India-Pakistan war of 1971. The meeting had failed to generate a common statement or a consensus on the matter.
  • China attempted a similar move in January this year as well, but it did not attract sufficient support from the UNSC members. The frequency of such attempts by China has prompted diplomats to highlight the unequal nature of the UN organ, where the agenda is set by the permanent members (P5) of the UNSC.

‘Pakistani bid’

  • Following Wednesday’s development at the UNSC, India’s Permanent Representative at the U.N., T.S. Tirumurti, described the move as an “attempt by Pakistan” that failed.
  • “In today’s meeting of U.N. Security Council, which was closed, informal, not recorded and without any outcome, almost all countries underlined that Jammu and Kashmir was bilateral issue and did not deserve the time and attention of the council,” he said.
Description: C:\Users\DELL\Desktop\daily market\the  hindu\august\07.08.2020\4.PNG

When did the UNSC first discuss J&K?

The Kashmir issue at the UN debuted on January 1, 1948 as India urged the UNSC to discuss the conflict that had erupted three months earlier when Pakistan sent irregulars, tribals and camouflaged soldiers into Kashmir prompting the Maharaja of the princely Indian State to accede to India. The submission of India detailing the violence unleashed by the irregulars on the local population and infrastructure became the foundation upon which the “Jammu and Kashmir Question” was created at the UNSC. The title was changed on January 22, 1948 to “The India-Pakistan Question”. From its origin till 1971, the topic featured prominently at the UNSC especially when both countries clashed.

Under Resolution 39 on January 20, 1948, the UNSC set up a three-member UN Commission for India and Pakistan (UNCIP). Disagreement between India and Pakistan led to the first failure as the commission failed to materialise. The commission was finally reconstituted with five members on April 21, 1948 and it was mandated to plan a mechanism to ensure a plebiscite in the State. (This was part of the UNSC Resolution 47). The UNSC Resolution 47 passed on this date urged India and Pakistan to hold a plebiscite after restoration of law and order. The UNCIP passed a resolution on January 5, 1949 that provided the mechanism for holding a “free and impartial plebiscite” in Kashmir.

At this juncture Pakistan managed to get an upper hand as the UNSC, under the influence of the United Kingdom, agreed to a ceasefire proposal without first ensuring Pakistan’s withdrawal from the area that it had gained during the early tribal raid in Kashmir. This allowed Pakistan to hold on to territory that would ultimately contribute to undermining the terms of the plebiscite itself.

Why did the plebiscite plan fall through?

The 1947-48 India-Pakistan war ended in a ceasefire but the Kashmir solution remained elusive. A key condition for the plebiscite was withdrawal of Pakistan from the areas under its control and India withdrawing individuals who were not residents of the State. However, neither of this happened. Instead both sides firmed up their presence in the areas under their control. India took the Kashmir issue to the UN for “prompt and effective action” but as pointed out by scholars, the big powers ensured that the issue lingered on and became a part of the global concern on conflicts.

What is the relevance of the Simla Agreement to the Kashmir issue?

Under the Simla Agreement of July 2, 1972, India gained Pakistan’s commitment that the Kashmir conflict would be resolved bilaterally. Pakistan, however, kept the issue alive by hosting the Islamic Summit of 1974 where Pakistan began courting the Islamic world for its major foreign policy goals. After the Simla Agreement, Pakistan proceeded to further entrench territorial status quo as Prime Minister Zulfikar Ali Bhutto on November 7, 1973 ruled out an independent status for Azad Kashmir.

The Northern Areas and Azad Kashmir were territories of the princely Indian State of Jammu and Kashmir that were awaiting plebiscite but the case for “accession” ruined the chance of Pakistan acting in accordance with the conditions of plebiscite, writes Aman M. Hingorani in Unravelling the Kashmir Knot. Under these circumstances, Kashmir as a legal problem appears far more daunting than Kashmir as a political problem that can be addressed by two powers of South Asia.

What have the members of the UNSC said?

Several of them have urged India and Pakistan to resolve the issue bilaterally — as India too has argued. Pakistan’s Foreign Minister Shah Mahmood Qureshi had gone to the UN with China’s support but the heightened military tension on the Line of Control and the ground situation on both sides show that the conditions in which the UNSC had passed its early resolutions on Kashmir do not exist any longer. Discussing the issue under UN auspices will be difficult for several reasons. First, the two parties (India and Pakistan) have continued the process of assimilation of territories under respective control into their union of states. Second, both sides had agreed to deal with it bilaterally.

5. VVIP planes set to arrive this month

The two Boeing 777-300 planes will not be part of the Indian Air Force fleet

  • The first of the country’s two VVIP planes is set to reach India later this month after a delay of two months due to the COVID-19 pandemic, according to a government official.
  • The two Boeing 777-300s, which were bought by Air India, will be the first of its kind, meant for exclusive use by the President, the Vice-President and the Prime Minister. As of now, Air India lends its Boeing 747 aircraft for VVIP foreign trips by withdrawing them from commercial flights.
  • The Boeing 777-300 planes were inducted into Air India’s fleet in 2018, but sent to Boeing’s facility at Dallas-Fort Worth within months for a retrofit.
  • These planes were scheduled to return by June 30 and July 30 this year, but Boeing sought an extension after delays in regulatory clearances from the U.S. Federal Aviation Authority due to travel restrictions.
  • “The first of the two planes will arrive in the week of August 24, and the second a month later,” the official said.
  • Once these planes arrive in India, they will be de-registered by Air India and handed over to the Indian Air Force. These planes will then get a K-series registration number given to military aircraft.
  • The revamped aircraft will include a press conference room, a conference room for VVIPs, a suite comprising a bedroom and a bathroom. The aircraft will be equipped with missile warning sensors and counter measures dispensing defence system.
  • The government has paid Air India ₹4,632 crore for the retrofit.
Description: C:\Users\DELL\Desktop\daily market\the  hindu\august\07.08.2020\5.PNG

Air India – The Beginning & Its Journey

  • It was founded as Tata Airlines (division of Tata Sons Ltd) in 1932 by J R D Tata
  • In July 1946 it became a Public Ltd Company with the name of Air India
  • 49% of the stake in Air India was acquired by the Government of India in 1948 (with an option to purchase additional 2%)
  • The government nationalized the carrier in 1953 and passed Air Corporations Act 1953, which provided the monopoly rights to Air India and its associates. This act was repealed after a standing committee headed by Pramod Mahajan recommended for it in 1993 and since 1994 the private sector players are allowed to participate in the aviation business
  • In 2007 the decision to merge Air India with Indian Airlines to form NACIL (National Aviation Company of India Ltd) was taken. The objective was to ensure lower administrative costs and other services. This merger was opposed by some of the stakeholders as the structure, culture and ethos of both the airliners were different. It is widely considered that the merger was a failure and the reasons are mentioned below.
    • Instability at the top – around the time of merger there were 4 CMDs in a span of 6 years. If there is no stability at the top one cannot find the stability in the operations which will affect the bottom-line.
    • The employee headcount was over 30000 which puts it at more than 200 per plane. It is very high as per international standards and will lead to increased cost of operations
    • The difference in the work culture also was a reason for the failure
      • Air India had five working days a week, whereas Indian Airlines had six working days a week
      • The pilots in Air India were promoted unconditionally once in 6 years whereas pilots in Indian Airlines were promoted once in 10 years provided there was a vacancy
      • The ground handling teams operated separately
      • Often there was more than one manager/supervisor for the same operation who followed their own SOPs and had no coordination and sharing of information
      • The differences were so evident that the government had to set up Dharmadhikari Committee (in 2012 on HR Issues of merged AI) which recommended uniform working conditions and pay scales (among other things)
    • One of the ways of reducing the cost of operations is that the airliners use only one type of aircraft (best example in the recent times is Interglobe Operations/IndiGo which uses only Airbuses to fly to places) but in case of Air India it used Airbus made planes for international operations and Boeing jets for domestic operations. This lead to higher cost of operations
    • The AI purchased 111 planes for which it took long-term loans. A CAG report in 2011 criticized this as it made no sense and was a recipe for disaster. The cost of this purchase added to the losses of the carrier
    • The combined losses of Air India (which was making profits before the merger) and India Airlines in FY 07 was 770 Cr which ballooned to Rs.7200 Cr after the merger by FY 09
    • The government in 2012 announced to provide a capital infusion of Rs.30,000 Cr till 2021 and since then AI has been running on taxpayers money (till 2017 Rs.26500 Cr has been infused)
Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on pinterest
Pinterest