Air India’s Boeing buy forced: CAG

New Delhi: Was India’s beleaguered state-run carrier forced, in 2006, to buy planes it didn’t need?
That’s the between-the-lines message of a report of the government’s auditor, the Comptroller and Auditor General of India (CAG), that is to be tabled in Parliament and which criticizes a ministerial group for the decision to buy 50 aircraft from Boeing Co. for Air India Ltd.
Mint has reviewed a copy of the CAG report, which looks at Air India’s acquisition of aircraft and the impact of this on its finances. The airline, which is weighed down by debt, is trying to arrive at a debt restructuring deal with banks even as it faces labour trouble.
Air India suggested that the order to Boeing include 15 long-haul aircraft valued at $3 billion (around Rs13,300 crore today) as an option. CAG’s audit shows that an empowered group of ministers (eGoM), after discussing the matter with the US firm, decided to buy all 50 aircraft because it was a good deal. The 50 were part of the 111 aircraft deal (worth around $11 billion) signed by the airline with Boeing and rival Airbus SAS in 2006, and CAG’s report claims this purchase was done without adequate due diligence or independent verification of cost-escalation claims by the manufacturers.
The CAG report doesn’t feature the airline’s response regarding eGoM’s role in finalizing the deal.
The ministry of civil aviation confirmed that the ministerial group had held negotiations with Boeing and decided to acquire all 50 aircraft, but former aviation minister Praful Patel, who was part of the group, defended the decision.
Prashant Bhushan, a Supreme Court lawyer, who is pursuing a public interest litigation seeking a court-monitored investigation into the deal, said: “Clearly this needs investigation. Prima facie it’s a thoroughly corrupt case as big as the 2G scam, involving huge kickbacks, politicians and bureaucrats. Here is a case where Air India, which was flying below capacity, was forced to buy aircraft, which were probably not required, at an exorbitant rate. We will press for a court -monitored investigation by the Central Bureau of Investigation (CBI).” Bhushan is one of the leading actors in the ongoing investigation into the allotment of licences and spectrum to telcos on allegedly favourable terms (aka the 2G scam) and his public interest case succeeded in having this investigated by the federal investigation agency CBI under the supervision of the Supreme Court.
29/04/11 Tarun Shukla & Appu Esthose Suresh/Live Mint

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Categories: Air India Apr 2011