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AI-IA merger, aircraft purchases were collective decisions: Praful Patel

LiveMint logoLiveMint 30-05-2017 Shaswati Das

New Delhi: A day after India’s Cental Bureau of Investigation (CBI) registered three cases and one preliminary enquiry related to aircraft purchases and leasing—and the surrender of profit-making routes—by the country’s two state-owned airlines, Air India and Indian Airlines, the minister who was then in charge said all decisions were taken “collectively”.

Some of the charges involve decisions that are at least a decade old. All were taken when the previous United Progressive Alliance (UPA) government was in power.

CBI said on Monday it had also launched a preliminary enquiry into the merger of the two airlines, Air India, and Indian Airlines, creating an entity called National Aviation Co. of India Ltd (NACIL), which was subsequently renamed Air India.

Air India declined comment on the probe into the alleged corruption and mismanagement that led to the airline suffering heavy losses, but Union minister of civil aviation Ashok Gajapathi Raju said in New Delhi on Tuesday that his ministry would “fully cooperate with CBI on this”.

CBI said on Monday it is investigating “unknown officials of the ministry, Air India, NACIL, unknown private persons, and private companies”.

In a copy of one of its first information reports, the agency says it is looking into allegations that the ministry “under Praful Patel, the then minister”, abused its position and conspired with other government officials and private domestic and foreign airlines.

Patel said the agency does not name “any individual” and that “all decisions were multi-tiered and collective”.

He added CBI “started a preliminary enquiry in 2013 during the UPA’s regime”.

The allegations are not new. They are part of a plea filed by the Centre for Public Interest Litigation, ruling on which, the Supreme Court, in January, asked CBI to probe the issues raised. And several government committees and departments have raised concern about the aircraft purchases and the merger in the past. This includes a report by government auditor Comptroller and Auditor General, and two parliamentary committees—one on transport and the other, public sector units.

The aircraft purchases cost the two airlines around Rs70,000 crore and the other decisions, CBI said in its statement on Monday, caused Air India significant losses. The state-owned airline has debt of about Rs50,000 crore, of which about Rs25,000 crore are loans taken to buy aircraft.

Patel said the aircraft purchase order had been cleared by an empowered group of ministers (eGoM) headed by P.Chidambaram and approved by Pranab Mukherjee, with the decisions being ratified by the cabinet.

In December 2005, the UPA-1 cabinet, with Patel as civil aviation minister, approved a purchase of 68 aircraft by Air India from Boeing Co. A year later, it approved Indian Airlines’ purchase of 43 aircraft from Airbus Group SE.

CBI is looking into these purchases and also into leasing deals entered by Air India.

In 2011, a CAG report said the purchases “will involve substantial negative cash flows”.

CAG’s report said although concerns on potential difficulties of funding the acquisition process had been raised, they had been ignored—a factor which CBI highlights in the FIR.

“Unnecessary expansion was made without any proper study and without any transparency. Loans were taken from US and Indian banks to finance the same, causing the airlines to go into debt and suffer huge losses.”

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