The Comptroller and Auditor General of India (CAG) has come down hard on the government for clearing the purchase of 111 aircraft for Air India (AI) and Indian Airlines (IA) in 2005 and also for merging the two into a single entity that resulted in huge loans and losses.
In a report tabled in Parliament on Thursday, it termed the decision to purchase aircraft in such large numbers a “recipe for disaster”. It also described AI and IA’s decision to form the National Aviation Company of India Ltd as “ill-timed”.
The auditor questioned the government’s policy of concluding bilateral agreements with foreign countries that went in favour of international carriers.
Then civil aviation minister Praful Patel responded: “Air India was supported by the entire government to augment its fleet. There is nothing black or grey in this. It’s only white.”
Dubbing the report as “full of contradictions”, he said whatever the government did was to make the airline commercially viable.
“We had to decide fast whether new planes should be bought otherwise the airline would have closed down.”
Referring to the airline’s pre-2005 fleet, he said, “These are just observations (in the CAG report). Decisions were taken at various levels in the government and (they) were necessary. I don’t think they were mistakes. Would anyone fly in an airline whose fleet is 20 years old?”
But Patel clarified that the decision on the number of aircraft to be bought, the source and the tendering process was all taken by the airline management. “AI called for tenders and negotiations were conducted as per CVC guidelines.”
“The airline’s decisions were scrutinised and vetted at various levels — the planning commission, Public Investment Board, finance ministry, cabinet committee on economic affairs and empowered group of ministers. No decision was taken by the aviation ministry,” he said.
He said the final decision went to the cabinet committee that appointed the empowered group.
On CAG questioning the timing of the liberalisation move, Patel said, “The Indian aviation growth story should be looked at holistically, not in compartments. Today more than 100 Indian cities are connected by air as compared to 45 earlier.”