Expert Speak India Matters
Published on Aug 02, 2018
If airlines symbolised the travel of the rich, they should logically have been banned altogether or taxed heavily. Instead, the government nationalised them, destroyed the civil aviation industry and set India back by decades.
70 Policies — Nationalisation of Air India, 1953 The following is a chapter from the book 70 Policies that Shaped India: 1947 to 2017, Independence to $2.5 Trillion. Find the book here.

For a poor country whose politics was burdened by socialism, the decision to nationalise nine functioning airlines into two entities was rather strange. If airlines symbolised the travel of the rich, they should logically have been banned altogether or taxed heavily. Instead, the government nationalised them, destroyed the civil aviation industry and set India back by decades. Under the Air Corporations Act <1> of 1953 that came into force on 28 May 1953, Parliament voted to nationalise nine airlines — Air India Ltd., Air Services of India Ltd., Airways (India) Ltd., Bharat Airways Ltd., Deccan Airways Ltd., Himalayan Aviation Ltd., Indian National Airways Ltd., Kalinga Airlines, and the Air India International Ltd — and replaced them with Indian Airlines and Air India International. The function of the corporations was to provide safe, efficient, adequate, economical and properly coordinated air transport services, whether internal or international or both. <2> Overnight, the business of running airlines by private citizens was made illegal, with punishments ranging from a minimum fine of Rs. 1,000 to a maximum imprisonment for three months, or both <3> for each flight. In tune with socialism, the nationalisation of airlines hurt only capital; all employees were shifted to the new corporations, turning a market-driven, services-oriented, consumer-centric business into the domain of overpaid, sullen and highly entitled employees. The political success of this single Act captured and consolidated government’s attitude towards the private sector and set the pace for the nationalisation of several other sectors, notably banking, <4> life insurance, <5> general insurance <6> and mining. <7> This nationalisation facilitated politicians, senior bureaucrats and the very rich, but destroyed India’s civil aviation, a sector that has a multiplier effect on the economy. Although J.R.D. Tata was appointed Chairman of both corporations, he found the processes stifling. “If government want them run as commercial concerns, they should pick the best men they can get and let them get on the job, subject only to general policy control,” Tata wrote to then Civil Aviation Minister Humayun Kabir, expressing his angst on long-winded board meetings, 100- to 150-page agendas and the unending discussion of previous agendas. <8> The recent failure of Air India’s strategic disinvestment, <9> which could have helped reduce the burden on taxpayers, shows the government needs to get real and rethink the sale pragmatically.

<1> The Air Corporations Act, 1953, Directorate General of Civil Aviation, Government of India, 28 May 1953, accessed 3 January 2018.

<2> Ibid., Section 7.

<3> Ibid., Section 18(2).

<4> Chapter 21: Nationalisation of Banks.

<5> Chapter 15: Nationalisation of Life Insurance.

<6> Chapter 25: Nationalisation of General Insurance.

<7> Chapter 23: Nationalisation of Coal Mines.

<8> N. Benjamin, “JRD Tata (1904–93) and India’s Economic Aspirations,” Jharkhand Journal of Development and Management Studies (Xavier Institute of Social Service) 14, nos. 3 and 4 (July–December 2016): 7111–7124, accessed 24 January 2017.

<9> Cabinet Committee on Economic Affairs, “Cabinet gives ‘in principle’ approval for disinvestment of Air India and five of its subsidiaries,” Press Information Bureau, 28 June 2017, accessed 3 January 2018.

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.


Gautam Chikermane

Gautam Chikermane

Gautam Chikermane is a Vice President at ORF. His areas of research are economics, politics and foreign policy. A Jefferson Fellow (Fall 2001) at the East-West ...

Read More +


Guillermina French

Guillermina French

Guillermina French Fundacin Ambiente y Recursos Naturales (FARN)

Read More +