This past week the Cabinet Committee on Economic Affairs (CCEA) decided to disinvest three hotels run by the India Tourism Development Corporation (ITDC). Hotels in Bharatpur (Rajasthan), Guwahati (Assam) and Bhopal (Madhya Pradesh) will be handed over to the respective state governments – actual owners of those properties.

In Assam, the state government wants to convert the hotel into a state guest house. The Rajasthan government plans to refurbish the hotel, probably with a private partner. The MP government is looking to build a large convention centre, again with likely private sector participation.

The CCEA press release emphasised “running and managing hotels on professional lines [was] not the work of the government or its entities”. This is a welcome iteration by the BJP-led government of the need for clarity on areas that are better left to market forces, and where state intervention should be minimal and confined to policy and regulation.

It is not as if the government has been unmindful of this. In the past three years, it has opened up more and more areas of business – from defence hardware manufacture to merchant mining of coal – to the private sector and ended state monopolies going back decades. Yet, it has been reluctant when it has come to the state actually receding from areas where it is not required. The absence of privatisation even in obvious cases has disappointed sections of its supporters.

To some degree this can be explained by the troubled economic situation the government inherited, made worse by the commodities crash that began in 2014. The crisis in the steel industry and the dumping of Chinese steel, for instance, has made it impossible to suggest privatisation of steel plants in very uncertain market conditions. Ten years ago, such arguments had greater receptivity.

Second, while this may not have been the government’s intention, it needs to be said that its focus on targeted and well-delivered welfare programmes has crowded out discussion on the state-market balance. Perhaps this was a political call and an electoral necessity, especially given the lingering view of some in BJP that privatisation contributed to the Atal Bihari Vajpayee government’s defeat in 2004.

Nevertheless, “strategic disinvestment” (a code for privatisation) is something this government has explicitly committed itself to on more than one occasion. The prime minister and the finance minister are known to take words and speeches seriously. This is one box they would want to tick before 2019. That Niti Aayog has been given the job of assessing which public sector companies should be candidates for strategic disinvestment would suggest this option is very much alive.

What needs to be found, however, is a suitable sales pitch for high-profile privatisation. Narendra Modi’s current political capital permits him to explore this. The allusion to state and market in the CCEA press release is a starting point. The discussion needs to be taken forward, and by the PM himself.

Since the absurdness of the government running hotels has been baldly stated, maybe the lens could now move to aviation and Air India. The government has facilitated and incentivised a regional and small-town air connectivity framework that is ambitious and welcome. Does it need to continue to subsidise well-to-do passengers who fly Air India and have in any case transferred a bulk of their domestic and international travel to more efficient private airlines, some of them Indian-owned?

This is not just a wider philosophical question. In the coming period, the Modi government has to take substantial calls on the taxpayer’s continued largesse to Air India. The airline’s current debt is Rs 46,000 crore. It does not earn enough to service this debt and each year borrows Rs 4,000 crore to pay interest on existing debt while, logically, also adding to that debt.

In 2012, the UPA government announced a 10-year programme of injecting Rs 30,000 crore into Air India. Today, the airline can manage its operational costs. The money injected by the government is used to pay interest on existing loans. In the five years since 2012, Rs 26,000 crore of the promised Rs 30,000 crore has already been disbursed. What remains (Rs 4,000 crore) can fulfil interest payments for only one more year.

As such at some stage in 2018, Air India will again run out of money. Even the 10-year largesse would have been exhausted, three years before time.

What will the Modi government do then? Pump in more money? How does that square up with emphasising limits to “the work of the government or its entities”? Is the welfare of 14,000 odd employees (with a combined salary bill that is much below the interest Air India pays each year on outstanding debt) really the best way to deploy taxpayer money? Could the money not be better used in, for example, building low-cost housing?

There is one other issue. The government has been pressing business groups that are in a debt mess to take haircuts, sell their equity at current (sometimes depressed) valuations to new investors and repay banks. Should the government not be upfront with the taxpayer on the need to take a similar haircut?

Air India’s liabilities are Rs 46,000 crore, its assets are about Rs 25,000 crore. Realistically that is about the price it will fetch. That one-time wound will hurt, but at least it will prevent taxpayer wealth being haemorrhaged day after day, year after year, as Air India’s market share and value drop, and as its liabilities mount. The Modi government owes citizens that honest conversation on Air India.