Friday, April 13, 2012

Do you wish to donate to BSNL etc....the Air India way?

We all work very hard to earn a living in this country. After all each of us have numerous responsibilities that we need to discharge. Taking care of our daily expenses, food, clothing, housing, education, etc. But there is one more thing that we seem to be working hard for.  This is to bailout the government owned enterprises.

That's right. This is being done by using our tax money to bailout those companies that are going under thanks to the government's own ridiculous policies. The way this works is that first the government will come up with policies and regulations to milk the cash out of its rich companies. Over time these eventually lead the company to the point of bankruptcy. The government will then create a hue and cry to make it look like the entire country would be in doldrums if the PSU goes under and is not bailed out. This way it lays a foundation to ensure that a huge corpus of cash is allocated to bail the company out. Now naturally the huge corpus of cash comes out of the cash that has been collected through taxes. That is your and our hard earned money.

This is exactly what has happened in the case of Air India. The government has decided to bail out the ailing national carrier with an infusion of Rs 300 bn through equity and cash. It has also approved the restructuring of the Rs 180 bn of the company's debt. The company has been going through bad times due to increasing operating costs which it was unable to pass through due to increasing competition in the sector. And when the company was already in a bad shape, the aviation minister decided to go ahead and order expensive aircrafts, all funded by debt naturally. The additional interest burden sent the company deep in red. But obviously it had nothing to worry about. The government has decided to rescue it with our tax money

And this has just paved the path for more bailouts. There are several PSUs that are bleeding. The list is long and illustrious. For example, the national wireless companies Bharat Sanchar Nigam Ltd. (BSNL) and Mahanagar Telephone Nigam Ltd. (MTNL) have been in the red for quite some time.

But is this what we pay tax for? The answer is no. The money collected through tax is meant to fund public services for the benefit of the citizens of the country. This includes roads, water works, electric utilities, health services, etc. Not to bailout ailing companies

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