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Blatant irregularities hastened Air India’s downfall: CBI

Author: Neeraj Chauhan, TNN
Publication: The Economic Times
Date: May 31, 2017
URL:   http://m.economictimes.com/industry/transportation/airlines-/-aviation/blatant-irregularities-hastened-air-indias-downfall-cbi/articleshow/58920454.cms

The Central Bureau of Investigation's three FIRs in the 'Air India scam' which took place during the UPA regime have alleged blatant irregularities which hastened the downfall of the national carrier.

The FIRs, accessed by TOI, said the civil aviation ministry decided to purchase 111 aircraft for Air India costing about Rs 70,000 crore at a time when the airline was showing a profit of about Rs 100 crore and didn't have the capacity to purchase even a few aircraft. Due to this particular decision, the airline immediately went into huge losses, which increased every year to reach tens of thousands of crores, the CBI said, quoting from the allegation levelled by activist-lawyer Prashant Bhushan in his PIL before the Supreme Court.

The FIRs mentioned an internal Air India report of 2000-01 which said the airline should only lease aircraft and not go for purchase. The view was overruled by the aviation ministry, the FIR said, quoting from Bhushan's allegations which led the SC to direct a CBI probe.

It was decided in 2004-05 that Air India will buy 68 aircraft instead of 28, as originally planned, a decision which quadrupled the expenditure from Rs 10,000 crore, as originally estimated, to Rs 44,000 crore. This apart, the government also decided to buy 43 planes for Indian Airlines at a cost of Rs 8,399 crore.

"Concerns regarding potential difficulties of Indian Airlines in successfully funding the acquisition process with a positive NPV (net present value) was raised within civil aviation ministry, but were ignored," the CBI FIR said, referring to one of the main allegations which led the court to direct the CBI to probe the alleged scam.

Interestingly, the CBI said the acquisition programme had been under consideration since 1996 but never got traction, until 2004 when it suddenly picked up speed.

"Between August 2004 and December 2005, the proposals were formulated by Air India, approved by its board, examined and approved by ministry, Planning Commission, department of expenditure, group of ministers and the cabinet," the FIR said.

Not just that, Air India signed the contract with Boeing to buy 68 aircraft on the same day, December 30, 2005, that the government cleared the purchase order.

The CBI said NACIL (National Aviation Company of India Ltd), incorporated to merge Indian Airlines and Air India, had an equity base of only Rs 145 crore, yet it made a commitment to pay Rs 44,000 crore for procuring 111 new aircraft.

It said loans for the purchase were taken from US and Indian banks, pushing the airline into debt and huge losses.

Similarly, the CBI FIR into the leasing of planes said the ministry and officials of Air India/Indian Airlines decided to lease planes "dishonestly without due considerations regarding proper route study and marketing or price strategy".

"The leasing was done despite airline running with very low load because of largescale aircraft acquisition and several flights, especially overseas flights running almost empty at a huge loss," the CBI said.

For example, Air India leased 15 expensive planes when it did not have pilots to fly the aircraft, the FIR said, emphasising that this was "known to everyone".

In another instance of alleged irregularity, Air India dry leased four Boeing 777s for a period of five years in 2006 even when new planes for the airline were set to arrive in July 2007.

This "resulted in five Boeing 777s and five Boeing 737s standing idle, leading to an estimated loss of Rs 840 crore during 2007-2009", the CBI said.

The third FIR to probe Air India giving up profitable routes and schedules for private airlines alleged that "foreign airlines were given unrestricted entry into India and major routes were given to them without taking any reciprocal benefits".

Air India gave up Kolkata-Bangkok, Kolkata-Dhaka, Doha-Kochi, Kochi-Kuwait and domestic routes like Ahmedbad-Jaipur, Mumbai-Vadodara, Pune-Goa and Mumbai-Patna and others.

"On all these routes, private airlines like Jet AirwaysBSE -0.39 %, Kingfisher BSE 3.03 %, Go Air, Indigo, SpicejetBSE 0.85 %, Paramount Airways etc started operating and made profits," the FIR said.

On lucrative routes like Mumbai-Dubai and Mumbai-Doha, Air India reduced its flights and gave private airlines major market share, it added.

(This article was originally published in The Times of India)
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