A-I misled by Reliance on insurance deal, say PSUs

New Delhi: Air India’s lucrative $8.9 billion insurance cover contract has kicked off a battle between private insurance companies and a public sector consortium led by The New India Assurance Company Ltd, with the latter writing to the airline to complain that tender contract norms have not been adhered to and were relaxed to the disadvantage of two bidders.
New India had the cover contract for 2008-09. In its communication to the chief vigilance officer of A-I, it has alleged that Reliance General Insurance (part of the Anil Ambani group) has misled facts and the certification provided by them should be verified before the final contract is given. The letter also says the company has registered its strong protest after A-I decided to open all the bids, saying this was a material breach of the letter and spirit of the tender.
A-I has denied any breach of procedure and says it has asked Reliance to respond to the allegation of New India.
After an aborted attempt in April, A-I had issued new tenders in June, asking for technical bids from insurance companies to participate in the aviation insurance renewal contract for 2009-10, as the existing one was ending on September 30.
The company called New India, Reliance and ICICI Lombard – which were technically qualified – on August 27 to open the bid documents. The sum assured by Air India has increased to $8.59 billion in 2009-10 as against $6.39 billion in 2008-09. Reliance General Insurance offered the most attractive deal, under which the airline will pay $24.3 million for 134 aircraft. The public sector consortium, led by New India Assurance, was close, with a bid of $24.9 million.
A Reliance General Insurance spokesperson, when asked about the issues raised, said, “We have submitted all requisite documents and information in compliance with the tender and as desired by Nacil (National Aviation Co, which runs A-I), including with respect to our reinsurers. The tender committee is evaluating all bids, and is yet to arrive at a final decision.”
“We have sought clarifications from Air India as some conditions were not met. The securities placed by Reliance on the lead underwriter — Japanese company Mitsui Sumitomo — does not fit in the criteria. The credibility of the lead reinsurer is very important because it furnishes the involvement of another 10-15 underwriters,” said a senior executive of an insurance company which had bid for the contract.
07/09/09 Surajeet Das Gupta/Shilpy Sinha/Mihir Mishra/Business Standard

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Categories: NACIL Sep 2009