Saturday, March 11, 2017

Air India understated losses, may need more financial support: CAG

New Delhi: The inefficiencies of state-run Air India may mean that a lot more of public money will be needed to keep the Maharaja alive than earlier envisaged. The Comptroller and Auditor General's (CAG) performance audit report of the airline was tabled in Parliament on Friday. The report said the government may have to reassess the fund requirement for the airline.
In 2012, UPA-II had approved equity infusion of Rs 42,182 crore in Air India over a 20-year period under a financial restructuring plan (FRP). This bailout was necessitated by UPA-I's controversial decision to order 111 aircraft for erstwhile AI, Indian Airlines and AI express which left the airline under a debt of Rs 43,112 crore on September 30, 2011, at a time when AI had a "low earning capacity and accumulated losses".
The auditor says AI understated its losses. "Though AI reported a positive EBITDA of Rs 166 crore (April-December 2014) from a negative Rs 191 crore (April-December 2013), both the statutory auditor and the CAG had expressed qualified opinion on AI's accounts for all the three years (2012-13 to 2014-15) pointing out significant understatement of losses in (its) financial statements. The understatement of losses were Rs 1,455.8 crore (2012-13), Rs 2,966.66 crore (2013-14) and Rs 1,992.77 crore (2014-15). Considering (these)..., the EBITDA of AI would be negative (up to March 2015,)" it says in a press note.
In its report on AI's actual performance vis-a-vis the FRP, the CAG says: "Audit noticed that short term loans of the company at Rs 14,550.88 crore as on March 31, 2016, recorded an increase of 0.93% in 2015-16 over the loan as on March 31, 2015, primarily on account of lower revenue generation by the company. The high volume of short term loans had largely eroded the benefits of financial restructuring carried out under the FRP," it says.
10/03/17 Saurabh Sinha/Times of India