Air India management misused funds: CAG report

New Delhi: Comptroller and Auditor General's (CAG) report on Air India draws attention to unscrupulous borrowing by the airline owing to gross mismanagement of the company's finances, which has landed the airline in financial distress.
According to a report by CAG, reviewed by ET, the airline had availed a colossal working capital loan of 19,207.39 crore as on July last year, while pegging its actual working capital requirement at 4,000-4,500 crore.
"This indicates that the management had not been able to improve the performance despite having made a commitment for enhancement of revenue and deduction in cost to the Group of Ministers," the CAG report said.
It further observed, "decision to pay wage arrears to employees out of working capital loans...when NACIL was facing an acute financial crisis was imprudent and further burdened the already strained financial resources of NACIL."
Working capital of an airline consists of expenditure on general operations, maintenance, fuel costs and wages, met through revenues. Borrowing indicates a shortfall of revenue, which was covered up by loans.
The CAG report also quotes Air India management as saying that the rise in working capital from 6,550 crore at the time of merger (2007) to 19,207 crore by July 2010 was due to factors like increase in interest burden on working capital and aircraft acquisition, increase in aircraft fuel expenditure and fall in revenue due to predatory pricing and recession, among other reasons. Air India has a total debt of over 40,000 crore at present and accumulated losses of over 13,000 crore. Civil aviation minister Vayalar Ravi in Parliament said that Air India earns 36 crore a day, while it spends 57 crore.
04/05/11 Anindya Upadhyay & Rohini Singh/Economic Times

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Categories: Air India May 2011