How IA, AAI fixed balance sheets

In fact, Indian Airlines has shown more patience with Pakistan than any political establishment in the country. Pakistan’s international carrier, PIA, owes Indian Airlines Rs 12.28 crore (Rs 6.21 crore as principal and Rs 6.07 crore as interest) on account of non-settlement of pool revenue since 1999.

If the CAG report on PSUs is a revelation of the amount of government funds sunk in them and the low returns, its observations on the PSUs under the Ministry of Civil Aviation — Indian Airlines, Air India and Airports Authority of India — are a lesson on window-dressing of balance sheets.

With A-I and AAI showing profits, playing down IA’s losses could make buying aircraft that much easier. So IA, in its reports for 2001-02, cleverly left losses of Rs 14.79 crore due to non-inclusion of licence fees and royalty payable to AAI through flight handling services at airports unstated.

Another Rs 18 crore showed up in the CAG report as an understatement of liability on account of landing and parking charges on account of revision of charges since 1999.

If help from AAI wasn’t enough, Rs 23-crore losses were understated by not paying A-I dues on account of revenue sharing for flights to the Gulf region, bringing down the Maharaja a few notches.

Cover-ups apart, shocking details of how the airline is run also show up in the CAG report. The excess grounding of IA’s A-300 and A-320 on account of delays in engineering checks caused a loss of revenue of Rs 208.85 crore.

Surplus inventory of spares which were never used amounted to Rs 26 crore. Nearly Rs 102 crore extra was spent on maintenance of aircraft either because planes were sent abroad for checks despite the company having facilities in the country or because IA paid Airbus Industrie to supply nose cowls which should have been supplied by the manufacturer for the life of the aircraft.

Says Buta Singh, Chairman of the Public Accounts Committee: ‘‘What Air India and Indian Airlines were 15 years ago and what they are today is because of these practices. Earlier, Air India had an entire building as its office on the posh Bond Street in London while today it has an office sublet by some other company — two rooms somewhere in the suburbs. Earlier, people used to buy AI tickets just to be able to use the Maharaja lounge at the Heathrow Airport and savour the good food served there; these days stale food is served which is probably left over from the British Airways flights of the previous day. All this because of lack of accountability.’’

Take the case of AAI’s accounts. The company invested Rs 984.72 crore of surplus funds between 1995 and 2000 in various banks at interest rates ranging between 8.55 per cent and 12.50 per cent. During the same period, the company borrowed Rs 57.35 crore at interest rates ranging between 15 per cent and 16 per cent. This resulted in a net loss of Rs 10.35 crore, the CAG has observed.

The AAI, which recorded a profit of Rs 267 crore in 2001-02, could well have been in the red if the other accounting errors recorded by the CAG report were considered. AAI did not account for Rs 77 crore payable to the CISF for providing security at its airports.

But it couldn’t fool the CAG despite taking recourse to several excuses. On one hand, it explained that it needed to borrow money from banks at a higher rate of interest to settle the CISF dues. This when the Government had already allowed it to charge passenger service fee to meet these costs. What’s more, AAI refunded Rs 55 crore of its Rs 57.35-crore borrowings between 1995 and 2002.

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