New Delhi : Air India could have been saved from the present financial mess had the government infused equity into the company while permitting it to buy 111 aircraft at the beginning of the decade. A CAG audit report found fault with the ministry of civil aviation’s decision to seek minimum equity infusion, and financing the aircraft order through debt.
In its report, the CAG has concluded that “capacity expansion by both the erstwhile airlines (Indian Airlines and Air India) without adequate due diligence by either the companies or the ministry as to requirement and imprudent project financing has put the merged entity into acute financial stress.”
CAG has examined Air India’s operations from 2005-2010, when Praful Patel was the civil Aviation minister, but his name is not mentioned anywhere in the report. Patel has often been accused of mishandling Air India and its aircraft purchase plan. His opponents have also made allegations on him granting profitable overseas routes to other airlines, instead of protecting Air India’s interests.
CAG has questioned the rationale for financing the purchase of 43 new aircraft by Indian Airlines, which took 97% of the purchase bill as debt. The normal practice is to take only 80% as debt. Indian Airlines proposed to place an order for buying 43 aircraft at $2,014 million plus Rs224 crore in 2002.
21/08/11 Sindhu Bhattacharya/Daily News & Analysis
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