Air India impacted by short-term loans: CAG
The government auditor also found fault with the national carrier for its failure in implementing the low-cost carrier strategy, “acute shortage” of narrow-bodied aircraft, rationalising staff cost and maintaining on-time performance parameters.
In its report ‘Turn Around Plan (TAP) and Financial Restructuring Plan (FRP) of Air India Ltd’ tabled in Parliament, the CAG said that these things were happening despite the airline achieving operational targets set in the TAP.
Under the TAP-FRP approved in April 2012, the government had committed to infuse equity of Rs 42,182 crore from 2011-12 to 2031-32.
The airline has achieved a surplus over its variable cost and all services recovered their fuel costs owing to the sharp fall in ATF prices, the CAG said, adding, “The company is yet to recover its total cost of operation.”
The auditor pegged the short-term loans at Rs 14,450.88 crore as on March 2015 though the cash credit, recording an increase of 0.93% in 2015-16, compared with the previous fiscal.
The CAG noted that the operational revenues increased, though not as envisaged in the TAP-FRP. But there were “significant concerns” on its future financial status, aircraft availability and deployment, HR policy and IT integration efforts, which in turn had an impact on the overall operational performance of the airline.
“The high volume of short-term loans had largely eroded the benefits of the financial restructuring carried out under FRP,” it said.
This has prompted the CAG to recommend to the government that equity funding should be adjusted after taking into account the reduction in loan amounts and lower interest liability on non-convertible debentures.
While castigating Air India for its inability to monetise its assets in the past four years of TAP-FRP, it said the airline failed to earn the targeted annual revenue of Rs 500 crore per annum from the exercise. Only assets worth Rs 64.06 crore were monetised, resulting in a resource gap of Rs 1,935.94 crore during Rs 2011-12 to 2015-16.
On the shortage of narrow-bodied aircraft, the CAG also wanted the airline to expedite leasing of such planes as it is needed to expand domestic and short- to medium-haul routes.
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