‘Aircraft decision wrong’

A report of the Parliamentary Public Accounts Committee (PAC) has concluded that the decision of the government (in 2005) regarding the number of aircraft to be procured by national carrier Air India from Boeing was “unfortunate” since the Government “went ahead with the deal without having a long-term perspective”.

The Government had then approved acquisition of 50 aircraft by Air India from (US aviation giant) Boeing.
“The committee deplores that when the purchase agreement was concluded in December, 2005, a desperate need for 50 aircraft was made out and in the next few years, there had to be deferment in the delivery of aircraft to reduce the burden of loan repayment,” the PAC report has said. It added that the number of aircraft to be procured was revised on the grounds that there was a requirement for long-range aircraft on the India-United States route despite the fact that “historically, the India-US sector was a loss-making sector and a commercially unviable route”. The PAC report has asked for responsibility to be fixed on the matter.
“The Committee observes that a company (Boeing) was given business out of the money borrowed from an American bank (Exim Bank) and to this the Government of India had stood as a guarantor against the advice of the ministry of finance,” the report states.
On the finding that during the negotiation process for the deal, the configuration of seats was reduced in the Boeing 777 aircraft, the PAC said, “The committee is therefore of the considered view that post-bid seat reconfiguration was irregular and the Government should evaluate the financial implications and report to the committee within three months of the presentation of this (PAC) report.”
Pointing out that there was (earlier) a want of level-playing field to Air India, the PAC said, “The committee is shocked over the manner in which massive excess entitlements for the most profitable gulf sector were granted to foreign airlines to the serious detriment of Air India.”
Supporting a massive infusion of equity by the Government for Air India, the PAC report said, “The committee feels that in order to bail out the company, the infusion of further equity of Rs 30,231 crore is of paramount need and the equity infusion should be expedited.”