CAG blasts Air India for mismanagement

New Delhi: Adding further fuel to the striking pilots’ charges of rampant corruption and mismanagement, the Comptroller and Auditor General of India (CAG) has questioned Air India’s ongoing acquisition of passenger aircraft claiming the “acquisition was not based on due diligence,” and has indicated massive mismanagement on several fronts, including terms of borrowing, and choice of routes to operate.
In its report, which is expected to be tabled in the next session of Parliament, the CAG observed, “The proposal to expand capacity was not warranted in view of intense competition and inability of IAL (Indian Airlines Ltd) to handle competition.” The CAG report also hauled up the airline for borrowing from IDBI at a higher rate of interest (11.75%) when it had the option of back stop financing (an arrangement where the airline comes up with a small down payment and the manufacturer covers the rest) at a modest 4% with the supplier, Airbus.
This led to the national carrier suffering a loss of Rs314.66 crore till March, 2010, and “a “loss of Rs 2,459.79 crore would further be incurred in future.”
The CAG further noted that the public exchequer suffered a loss of Rs199.37 crore on account of bridge loans availed by IAL at higher rates. The report also criticised the management of routes.
01/05/11 Aditya Kaul/Daily News & Analysis

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Categories: Air India May 2011