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Updated: January 21, 2010 16:07 IST

Parliamentary panel slams govt for hasty decision on airlines merger

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An Indian Airlines plane prepares to land while another prepares to take off from the Chatrapati Shivaji International Airport in Mumbai.
PTI An Indian Airlines plane prepares to land while another prepares to take off from the Chatrapati Shivaji International Airport in Mumbai.

Slamming the government for deciding on the merger of Air India and Indian Airlines without home work and in haste, a Parliamentary Committee on Thursday asked the Centre to write off all its losses saying these were caused primarily by “irrational and misplaced” policies.

In another major recommendation, it said the National Aviation Company of India Ltd (NACIL), which now runs the merged entity, should be converted into a holding company with NACIL-A and NACIL-I as “separate functional units“.

Observing that Air India should defer its aircraft buying plan “to reduce the debt burden”, the Parliamentary Standing Committee on Transport, Tourism and Culture also recommended a probe into the plan “to fix responsibility for taking such ambitious decision that has become a big financial liability“.

On the March 2007 merger between the two national carriers, the Committee, headed by CPI(M) leader Sitaram Yechury, said the decision was “taken in haste, without required homework and consultations. As a result, the entire process has, in fact, been unduly delayed, if not derailed.”

It said that the 31-member panel was of the firm view that NACIL’s turnaround was “not possible by shifting the burden of the crisis on to the shoulder of the employees and blaming them for the ills of the company.”

“The Committee, therefore, has recommended that as a first step the government should write off the entire loss suffered by NACIL as the loss was due to the policy directions of the Ministry of Civil Aviation”.

“The one and only way of overcoming the problem is to change the often irrational and misplaced policy decisions of the government,” the Committee felt.

Taking the Ministry to task on granting of bilateral air traffic rights, it said it was dismayed that even after Air India’s “earnest plea” for checking the unrestricted entry of foreign airlines in India, “the government looked the other way and decided to grant further bilaterals to various foreign airlines, thus making NACIL more vulnerable to operational difficulties and losses“.

Pointing out that Air India and Indian Airlines had different fleet consisting of Boeing and Airbus planes and had separately worked out their acquisition plans, it said that NACIL also continued to lease aircraft or renew their leases even when new planes were being delivered to it.

“All such decisions taken by the management and the Civil Aviation Ministry had ultimately resulted in big financial loss to the company,” it said and recommended review of all lease agreements and appropriate action taken.

“In the process, it has given rise to so many problems concerning financial, administrative and operational, which could not be foreseen by the people who took this decision,” the Committee said.

It referred to the “inherent contradictions” of human resources and aircraft type existing in NACIL, and said that these, apart from other factors, had become “major stumbling block in achieving the required economies of scale and increased leverage”.

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