CAG reports Rs. 5000 Crore loss in Air India

October 30, 2011

The recent finding of the Comptroller and Auditor General of India has opened another pandora’s box for the UPA-II Government. CAG has found that AI and erstwhile Indian Airlines lost Rs 2,100 crore in a 111-aircraft deal during UPA-I through faulty purchase and bridge loan deals and also avoidable expenses incurred because of delay in returning leased planes. The break-up of the total Rs. 5000 Crore loss is mentioned here:

1,700cr: Extra expense for not returning lease planes on time when new ones started joining fleet
200cr: Defective contract terms for aircraft payment
200cr: Pricey bridge loan
2,775cr: Extra cost due to expensive loan to buy planes

The CAG has found that between the Rs 2,100 crore loss (due to AI and IA’s 111-aircraft deal) and the Rs 2,775 crore loss (due to costlier loans for buying 21 Airbus planes), the national exchequer may have been bled to the tune of Rs 4,875 crore.

Similarly, there is another issue coming up on appointment of Arvind Jadhav. As reported by Times of India, an RTI plea has revealed that Arvind Jadhav, who was made AI chairman in 2009, had been rejected a year earlier as he did not have any experience in aviation Jadav’s selection under cloud.
UPA-I chose to replace Raghu Menon with Jadhav at a time when the election code of conduct was in place. It’s worth note that Menon had steadfastly refused to sign a controversial ground-handling deal with a foreign company and had asked for a oneor two-year ban on giving any more flying rights to the Gulf and South East Asian carriers to avoid revenue loss to AI.

The struggling Air India, which is not even able to pay wages, has a collective dues, losses and loans of close to Rs 70,000 crore. UPA-2 is facing a lot of heat in Parliament over these decisions now.

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