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Flight To Losses

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Why do we need a state-run airline called Air India? The only answer seems to be that it’s an effective favours and dole dispenser – read free seats and freer upgrades for politicians and bureaucrats. Paid for by taxpayers of course. Here’s the bill: losses for the `proud’ flag carrier stand at Rs 7,000 crore, up from Rs 5,552 crore last year.

 

Amazingly, the Government is still talking of a path to revival, while the only path visible seems to be bankruptcy. Why Air India alone? Let’s look at telecom company MTNL whose sales have been dwindling for the last five years. From Rs 5,568 crore in March 2006, they went to Rs 3,657 crore in March 2010.

 

Salaries > Sales

 

For the same year i.e. 2010, losses stood at Rs 3,064 crore. Why? Because employee costs shot up from (a crippling) Rs 2,065 crore in March 2009 to, hold your breath, Rs 4,869 crore in March 2010. So, MTNL seems to have the unique distinction of employee costs being higher than company sales. This should figure as a record somewhere. Why again? Well, because of the Sixth Pay Commission, which raised all Government compensation.  Incidentally, in March 2009, profits were Rs 168 crore. So who’s going to fund this one? We don’t know but could take some wild guesses.

 

And then there is the behemoth BSNL. Revenues for 2010-11 are expected to be around Rs 31,738 crore while losses are at a (modest) Rs 2,725 crore. BSNL may cut losses (as it promises) in a few years but fact is that employee wage bills have zoomed, similar to MTNL. In 2008-09, BSNL showed a net profit of Rs 575 crore and in 2009-10, that turned into a net loss of Rs 1,823 crore. IndiaSpend of course is tracking the whole gamut of state-run enterprises and how their balance sheets stack up, including of course understanding how employee costs are skyrocketing even as output and profits are declining.

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