The Hindu Business Line : CAG, Indian Airlines differences over productivity-linked incentives

DIFFERENCES have cropped up between the Comptroller and Auditor General of India (CAG) and the Indian Airlines (IA) on the issue of increased payment of productivity linked incentives (PLI).

While the CAG has highlighted that the overall profitability of IA has not improved during 1998-99 to 2002-03 despite the increased payment of PLI, the airline has maintained that it would not be appropriate to correlate PLI to profitability for the period under review.

Airline sources held that the profitability of IA during this period suffered on account of extraneous factors that were beyond its control. The impact of the incidents of September 11, 2001, the sharp northward surge in the prices of aviation turbine fuel and the general increase in insurance charges had adversely impacted the profitability of the state-owned airline. "The losses during the period are not on account of PLI," sources said.

In a recent report, the CAG had noted that the overall profitability of the airline did not improve despite the increased payment of PLI, up from Rs 239.7 crore during 1998-99 to Rs 344.07 crore during 2002-03. This, the CAG held, was against the wage policy that any increase in emoluments was to be based on increased productivity and savings and the inflow, as a result, must increase with the outflow.

While CAG had recommended that parameters of PLI scheme should have direct linkages to increases in revenue and savings, sources maintain that the parameters of PLI in the airline have been linked with the physical parameters, which lead to increased generation of revenues of the company. Sources maintain that the payments made to employees are correlated to the purpose for which they are being made.

The CAG had highlighted that the total PLI payments of Rs 1,449.02 crore made during April 1998 to March 2003 exceeded the losses of Rs 585.83 crore incurred by IA during the period.

The report had concluded that IA had formulated various schemes for payment of wages and allowances and PLI to its employees during the last five years ended March 2003, without linking them to the financial performance of the company, continuance of which would have adverse impact on the financial viability and sustainability of the company on a short and long-term basis.

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