Question

As per a news report dated 8th Oct. 2021, the Government of India sold its entire 100% stake in Air India. Tata Sons, the original founder of Air India, won the bid and purchased the airline for 18,000 crore.
(1) Identify the step taken by the Government of India.
(2) State any two ways in which the identified step can be executed by the government.

Hint:

Privatization can help improve the efficiency of state-owned enterprises by bringing in private sector expertise and reducing the financial burden on the government.

Answer 1

(1) Government Action: The Indian government privatized Air India by divesting its entire 100% ownership to the Tata Group. This action aligns with the government's disinvestment strategy to decrease public sector involvement in non-essential industries. (2) Execution Methods:
1. Auction/Bidding: Privatization can be achieved through an auction or bidding process where private companies submit offers for the enterprise. Tata Sons successfully acquired Air India through this competitive bidding process.
2. Share Sale to Private Investors: Alternatively, privatization can occur by selling company shares to private investors via the stock market. This approach facilitates a phased ownership transfer and generates government revenue.