CAG: AI may have lost upto Rs5,000 crore through bad deals

New Delhi: The Comptroller and Auditor General of India (CAG) has said that Air India and the erstwhile Indian Airlines lost close to Rs2,000 crore in a deal for 111 aircraft that was finalised during the first term of the current UPA regime. The loss accrued through faulty purchase and costly loans, as well as through delay in returning leased planes.

The figure may actually come closer to Rs5,000 crore as CAG says the erstwhile domestic carrier, the Indian Airlines, now merged with Air India, opted for costlier loans for the purchase of 21 Airbus aircraft.

This faulty option has caused losses of Rs315 crore till last March.

"A loss of Rs2,459.79 crore would further be incurred in future... (due to) faulty finances," the audit observation under the head of "funding of the project" says.

However, it may be pointed out that the airline has provided a lengthy response justifying taking from banks, which the aviation ministry claims was found to be satisfactory by CAG. It is likely that this observation may be dropped from the final report.

The CAG's performance audit on aircraft acquisition has blasted the decision to acquire so many planes in one go. "Capacity expansion was not based on due diligence. While replacement of (old) aircraft.. is understandable, the proposal to expand capacity was not warranted in view of intense competition and the inability of Indian Airlines Ltd to handle competition with its poor financial performance... It should have opted to procure aircraft in two phases," the report says for erstwhile IA.