Appraising its own Civil Aviation report (Air India) of September 2011, the Comptroller and Auditor-General has described the criticism of its findings as an attempt “to shoot the messenger,” and pointed to several subsequent events that have ratified the conclusions.
The report highlighted that Air India’s acquisition plan had been a recipe for disaster ab initio. The CAG criticised the national carrier and the Civil Aviation Minister “for an unduly delayed acquisition process that was disastrous for [the] financial health of the commercial airline.” The acquisition of 111 new aircraft for Air India and Indian Airlines was a “recipe for disaster.”
The report highlighted that Air India’s original proposal for acquisition of 18+10 aircraft took its own time for processing but the revised proposal for 18+50 aircraft was processed faster. The CAG also criticised the merger of the two state-run carriers as “ill-timed” and said, “The financial case for merger was not adequately validated prior to the merger.”
The report recommended a “hands-off” approach to the management of the airline, dwelling at length on Air India’s losses, fleet acquisition, merger, huge debt burden, delay in joining the global grouping Star Alliance and its financial and operational performance. The report highlighted the massive Rs. 38,423-crore debt liability as of March 31, 2010, attributing it to the large number of planes. Even where price negotiations were concerned, the CAG said that no benchmark of prices and commercial intelligence was set. It concluded that Air India was “in a crisis situation” and that salary payments and aviation fuel obligations would become increasingly difficult.
Now, after its internal assessment, the CAG has drawn attention to an admission by the new Civil Aviation Minister, Ajit Singh, in May 2012: “We all agree that the merger hasn’t progressed or happened as it should have.”
Secondly, in April 2012 the government approved a Rs. 30,000-crore bailout package for Air India, to be pumped in over the next 9 years with an immediate infusion of Rs. 6,750 crore, in addition to Rs. 3,200 crore already funded.
Yet again, the admission by Mr. Singh that Air India was losing money on short haul international flights and ways had to be found for cutting wasteful expenditure ratifies the original findings of the CAG. In fact, the plan for a new pay structure within Air India by itself shows that the CAG was on the right track, says its internal assessment.
The CAG’s assessment cites more than a dozen other announcements, analyses, media reports and debates to conclude that its Air India report, “unlike normal audit report, was technical and used a lot of technical concepts. The full implications of the concepts and audit observations emanating out of them would have been clear only to persons willing to analyse them with an open mind. The government’s subsequent actions have only collaborated this.”
In relation to the Prime Minister’s comment seeking to limit the CAG’s mandate under the Constitution, the CAG in a background paper, argues that “when audit is viewed as a partner in good governance, allegations of trespass into executive territory lose their relevance.” It further points out that the CAG has statutory obligations to question policies affecting revenues of the state and making appropriate recommendations.
In fact, Article 149 dealing with the CAG does not attempt to define audit but instead states that the CAG “shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament. The Parliament, in approving Section 13 of the CAG DPC Act, followed the same tradition and concluded that ‘it is the duty of the CAG to audit all expenditure from the consolidated fund of the Union and the States and all the transactions in the constituency fund and public account’.”