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CAG calls AI buying aircraft a 'huge waste'

Sep 08, 2011 12:45 PM IST Business Business

New Delhi: The Comptroller and Auditor General (CAG) report on Air India has come down heavily on the Civil Aviation Ministry while terming the acquisition of aircraft by the airline as "risky" and a "huge waste". The report, tabled in Parliament on Thursday, also called the merger of Air India and Indian Airlines as "ill-timed".

According to the CAG that no benchmark for the cost of aircraft was carried out before negotiations for buying them and the acquisition seemed to be supply driven. The CAG report pointed out that Air India has the debt liability of Rs 38,234 crore in March 2011. It added that Air India hastily reworked its earlier acquisition plan.

The acquisition of aircraft was to be funded through a debt which was a disastrous move and should have raised alarm in the Civil Aviation Ministry and the Planning Commission.

While the Planning Commission and the Department of Expenditure raised several concerns but finally agreed on the acquisition proposal, said the report.

CAG also reveals that the assumption that acquisition would substantially increase the Air India market space has not been adequately validated.

Criticising the use of Air India planes for VIP duties, the report said that reimbursements of costs in such cases was not done. It also asked the management and employees to set aside their interests if the airline has to survive.