New Delhi:  The report of the Comptroller and Auditor General (CAG) on Air India, tabled in Parliament today, takes the Civil Aviation Ministry to task on its expansion plans. The government’s auditor has said crores were wasted in the purchase and leasing of aircraft and that was the basic reason that the national carrier is in a financially crippled state.

Much of the auditor’s report is based on what it calls the government’s faulty acquisition plans. The acquisition, it says, was indecisive and does not withstand audit scrutiny. When approvals to acquire new planes took eight years – from 1996 to 2004 – why, the CAG asks, did the next phase of approvals happen in just months? It has questioned the sudden hurry and also points out that while in early 2004 Air India said it needed 18 new planes, that number had gone up to 24 by November that year.

The decision to buy aircraft, the CAG report concludes, was driven by supply, that there was no demand for more planes, a charge strongly refuted by the then Aviation Minister Praful Patel.

The expansion plans it says was to be funded through debt or loans, to be repaid through revenue generation, except for a small infusion of Rs. 350 crore as equity. This, the CAG describes as a “recipe for disaster” and says it should have raised alarm signals in the civil aviation ministry, planning commission and public investment board.

The report says in a contract with Airbus for planes, Air India took a Rs. 200-crore loan and paid a high rate of interest on it. The Civil Aviation Ministry has said this was a decision taken by the airline.

The CAG has also slammed the ministry for setting up no cost benchmarks before buying aircraft. It says the ministry failed to factor in additional costs while projecting additional revenue from its expansion plans. The assumption of dramatic increase in IA revenue while assuming other costs to be constant was unrealistic, the report said.

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