CAG raises eyebrows on aircraft purchases for Air India
New Delhi: The nation’s official auditor in its report submitted to parliament Thursday slammed the aviation ministry and flagship carrier Air India for haste in pushing the process for buying 111 aircraft, relying on assumptions that it said were at best “flawed”.
The Comptroller and Auditor General of India (CAG) reviewed the decision to buy 68 Boeing aircraft for Air India and 43 Airbus planes for Indian Airlines, and called the acquisition process ill-timed and driven from the top.
Air India and Indian Airlines were merged in April 2007 into the National Aviation Company of India Ltd. (NACIL), which has since been renamed as Air India.
In a report tabled in the Lok Sabha Thursday, the CAG said the initial proposal to acquire aircraft was first made in 1996. But soon after the United Progressive Alliance (UPA) government took charge in 2004, the procurement process picked up speed and the deal was wrapped up in seven months.
The new deal also saw Air India altering the acquisition plan, at the behest of the civil aviation ministry, from buying 18 small capacity short-range aircraft and 10 medium capacity long-range planes in January 2004 to 50 medium capacity long-range aircraft in November 2004.
The auditor said that between August 2004 and December 2005, the proposal was formulated and approved by the Air India board, the ministry of civil aviation, the Planning Commission, the Public Investment Board and the Cabinet Committee on Economic Affairs.
“Government conveyed its approval on Dec 30 and the contract was signed by Air India with Boeing on the same day. From receipt of proposal to signing of contract took seven months. Many of the key assumptions underlying the revised project report (for 50 long range aircraft) were flawed,” said the CAG in its findings.
“Chronology of events leading to change in aircraft requirements of Air India clearly brings out the role played by the ministry in the proposal being revised from 10 long range aircraft to 50 long range aircraft,” the auditor said.
About the acquisition of 43 aircraft from Airbus for the erstwhile Indian Airlines, the CAG said the needs of the carrier could have been met by a more limited number of planes.
From 2006-07 when Indian Airlines started to take delivery of the aircraft to 2009-10, the carrier’s total revenue declined by 25 percent from Rs.7,196 crore to Rs.5,372 crore as the cost of operating these many flights took a huge toll on the company’s finances.
“Indian Airlines could not even achieve constant revenues at constant costs, let alone increased yields; this was to be expected, considering the wholly unrealistic nature of the assumption. This factor, though overstated by the airline, should have been questioned by the government,” the CAG said.
The merger of Indian Airlines and Air India was also questioned by the CAG, which called it unjustified and not adequately validated.