Revival plans fail to provide tailwind to Air India: CAG report

Andrew Cummings
March 20, 2017

Parama Sen, principal director, Comptroller & Auditor General of India (CAG), wondered whether the revival plan was helping AI.

The north-bound graph of Air India's financial health has suddenly turned south, with central auditor CAG pointing out that the national carrier made an operating loss of Rs 321crore last fiscal as against the airline's claim of Rs 105 crore profit.

The airline said its accounts for the year 2015-16 were prepared in line with the generally accepted accounting principles and accounting standards issued by the Institute of Chartered Accountants of India. "But based also on the statutory auditors' reports, the airline had an operating loss of Rs 321.4 crore past year because the required provisions were not made", Director General in the Comptroller and Auditor General (CAG)'s office V. Kurian told reporters here.


What is even more disturbing is that under-reporting is not confined to Financial Year 2016.

In a report tabled in the Lok Sabha on Friday, the Comptroller and Auditor General (CAG) said AI had underreported losses over the past three financial years.

The benefits for Air India from the financial restructuring plan have been largely eroded by high volume of short-term loans and the state-owned airline should look at rationalising costs, the CAG said today. Add to that about Rs 426 crore of losses the airline under-reported in 2015-16, and the total figure comes to about Rs 6,841 crore. The audit said the terms and conditions made it impossible to monetise five of 12 properties.


The FRP was meant to restructure accumulated working capital loans worth Rs 22,157 crore as on March 31, 2011. But the airline's short-term loans kept rising to more than four times the limits laid down in a turnaround plan due to "failure in generating projected revenue, mainly on account of non-achievement of asset-monetisation target, increase in staff costs", the C&AG said in its report. This has led the C&AG to recommend that "the company and the ministry (Of civil aviation) may need to reassess the requirement of funds envisaged in the turnaround plan".

Scrutiny of the registers revealed that apart from expenditure of Rs 81.23 crore by the DIP, Rs 20.23 crore was paid in 2016-17 for advertisements released during 2015-16 - bringing the total expenditure to Rs 101.46 crore.


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