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The Comptroller and Auditor General (CAG) has warned that unless the Government lays down a roadmap for liquidating huge debt, removes infirmities, including those in air services bi-laterals, and gives more than a level-playing field to Air India, the airline does not have a future as a vibrant public sector entity.
Aircraft acquisition
According to the Performance Audit Report of Civil Aviation in India, tabled in the Lok Sabha on Thursday, the Government auditor termed the acquisition of large number of aircraft as ‘risky' and merger of Air India and Indian Airlines as ‘ill-timed.'
“In the case of erstwhile Air India, the large acquisition was clearly driven under the influence of Ministry of Civil Aviation,” the report said.
The CAG has also not supported the process of equity infusion by the Government. It said that piecemeal infusion of small amounts is merely going to delay the certain closure of the airline.
Talking about the acquisition of 111 aircraft (by both Air India and Indian Airlines), the report said it is suspicious of the manner in which the entire acquisition process took place. It, however, did not name any individual here.
It took eight years (1996-2004) to progress up to the government level for purchase of 28 aircraft, but the proposal was revised, approved and the contract signed between August 2004 and December 2005, the report said.
The Government auditor was very critical of the financing and timing of the acquisition of the aircraft. “The entire operation (for both Air India and erstwhile Indian Airlines) was to be funded through debt (to be repaid through revenue generation), except for a relatively small equity infusion. This was a recipe for disaster ab initio and should have raised alarm signals in the Ministry of Civil Aviation, the Public Investment Board and the Planning Commission,” the report said.
Bi-lateral services
The CAG was also critical about the decision to go in for liberal expansion of the air services bi-laterals — which are agreements allowing an airline to operate flights between two countries.
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