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New Masters of the Universe

The World is their Oyster


Prepared By: Aaditi Batra Akanksha Bansal Deepanshu Harjot Dhawan Saransh Anand

State Owned Enterprises(SOEs)


Account for 28 of the emerging worlds 100 biggest economies

State owns more than 10% of the shares

SOEs are becoming wealthier and powerful even as the overall state sector shrinks

Forming alliances with private sector specialists to increase their access to expertise and ideas

Sovereign Wealth Funds(SWFs)


Control about $4.8 trillion in assets in the world

Savings funds

-intend to find productive homes for investments

Development funds -intend to promote economic growth as well

Present Scenario

Financial crisis of 07 - 08 shifted the interest of SWFs into Development Funds

Petrostate SWFs increased their emphasis on investing in Science And Research

Taking active interest in management of companies

Although it has some of the worlds biggest state owned companies, Indias public sector is a leftover of the Licence Raj rather than thrusting new national champions.. Do you agree?

License Raj Initiated by Nehru after Independence Lasted unto early 90s All private companies had to get licenses and approvals from Govt. and work under their supervision

National Champions

Factors affecting SOE..


Under utilization of installed capacity. Worker participation in management. Political accountability over performance accountability.

Lack of motivation.

Soft Budgeting.

Poor planning and delay in implementation of project.

Excessive dependence on external source of funds.

Problems to be addressed in SOE


Extent to which Public Sector Enterprises are falling short of their maximum possible output from existing set of Input & Technology. They have failed to achieve maximum output at the same time have declined in technical efficiency over time.

Solutions to these problems:

Upgradation of existing technology.

Hardening the budget option using Input and technology more efficiently.

Do you think Air India should be privatized?

Glorious Past of Air India


It was the 3rd best airlines in the world 50 years ago.(market share 60%)

Other Airlines used to ask AI for help in helping them set up airlines in their home countries (like Singapore airlines and Korean air)
Indian Airlines which always made a profit & was a threat to Jet , Kingfisher and the other private players was closed down and merged with AI.

Current Scenario
Air India has the fourth largest share in India's domestic air travel market, behind Jet Airways, IndiGo and SpiceJet. Facing financial losses(Debt of Rs. 42,570 cr) Discontent among employees. Poor customer service. Market share of 14%.

Factors affecting Air India


High Fuel Cost High Interest Rates for external borrowings. Cancelling of all Ai's profit making routes and given them to private airlines. Problems after merger with IA. Tough Competition. Cronyism.

A regrettable move?

Solutions to this problem


Air India has never been known for best management practices. Private sector - better equipped with CRM strategies and implementation. Government should focus more on public welfare services rather than running an airline Heavy bailouts is it in public interest to let tax payers bear the brunt? Air India- the national carrier Invalid argument Successful examples of national airlines privatised Austrian airlines by lufthansa

Privatization of Air India

The case against Privatization


Who will buy AI? - With its current level of losses and debt, AI cannot be a good business proposition for a potential buyer.

Is privatization a real solution? (Private airlines like Kingfisher are in the same boat as AI)
What is really required is professional managers, a strong leadership and structural changes in management. ( If state owned banks can be successful, then why not state owned airlines?)

Bibliography
http://www.dailymail.co.uk/indiahome/indiane ws/article-2144334/Privatising-Air-Indiaobvious-option.html#ixzz23iqRgbeD http://articles.economictimes.indiatimes.com/2 012-05-31/news/31922058_1_tax-on-airtickets-aviation-service-tax http://www.economist.com/node/21559372

THANK YOU!!!