CAG turns the heat on Centre, yet again

Auditor questions AI policy; lambasts Oil Ministry

One of the two CAG reports, which the Opposition will likely use to attack a beleaguered UPA government riddled by allegations of corruption at high places and failure to deliver the goods, ran down Air India on several of the decisions it took which has now left the airline bleeding with several thousands crores of rupees in losses.

On the other hand, criticising the Petroleum and Natural Gas Ministry, the other CAG report has sought an "in-depth review" of 10 contracts, including eight awarded to Aker Group by Reliance. Both the reports, expected to make the government uncomfortable, were placed in Parliament on Thursday, the last day of monsoon session.

The two reports came close on the heels of the CAG’s damning report which created a storm in political and industry circles as it ripped apart the government policy on 2G spectrum and put the notional loss in spectrum allocation at Rs 1.76 lakh crore.

As regards the ‘Performance audit of civil aviation in India’, the CAG said: “AI is in a crisis situation. Salary payments and jet fuel obligations are becoming difficult. If the airline has to survive, the management and employees will have to set personal interests aside and undertake some harsh decisions, till the health of the airline improves”.

Much of the auditor’­s report is based on what it calls the government's faulty acquisition plans. The report described the merger of Air India and Indian Airlines as “ill-timed” and done without adequate consideration of the difficulties involved in integration in terms of human resources and IT.

It called the decision to buy 68 aircraft – 50 for the erstwhile Air India and 18 for then Indian Airlines – “risky”. It pointed out that the speed (of seven months) with which the government signed contract with Boeing for 50 planes.

The contract was signed the same day the government conveyed its approval, it revealed. “It imposed an "undue long term financial burden on the carrier.”

On his part, soon after the report was out, then civil aviation minister Praful Patel defended the decision to acquire 111 planes for Air India, saying there was no other way for the airline to compete internationally at that time.

“In 2004, AI and IA had 93 aircraft, most of which were 20 years old. There was no way the airline could have withstood the global competition with these planes,” Patel, during whose term the contract was signed and merger decision was taken, told reporters here.

In its ‘Performance audit of hydrocarbon production sharing contract (PSC)’, the Comptroller and Auditor General faulted the Oil Ministry and its technical arm, the Directorate General of Hydrocarbons, for allowing Reliance to retain the entire 7,645 sq km KG-D6 block in the Bay of Bengal after the giant Dhirubhai-1 and 3 gas finds were made in 2001.

The report, however, did not comment on more than tripling of the field development cost not did it say if the capital expenditure for KG-D6 — being raised from $2.4 billion proposed in 2004 to $8.8 billion in 2006 — was unjustified or inflated.

As per the PSC, Reliance should have relinquished 25 per cent of the total area outside the discoveries in June, 2004, and 2005, but the entire block was declared as a discovery area and the company was allowed to retain it.