ED smells fraud in Air India-Indian Airlines merger

In fresh embarrassment to the United Progressive Alliance (UPA), the Enforcement Directorate (ED) has registered four cases of money laundering in connection with the controversial merger of the Air India and Indian Airlines, and alleged irregularities in procurement of 111 aircraft by the two State-run carriers in 2005-06.

The ED has registered the Enforcement Case Information Reports (ECIRs) under the Prevention of Money Laundering Act, setting in motion a probe into the four cases.

The agency's ECIRs are based on the four FIRs registered by the Central Bureau of Investigation (CBI) last year in connection with the controversial merger and the airplane deals.

The ED, which has obtained “relevant documents” from the airlines and other departments, will probe “a specific angle” to ascertain if the alleged irregularities led to the generation of black money and whether it was laundered to create illegal assets by the accused, officials said.

The move brings fresh trouble for Air India, which is already under stress battling several challenges.

The ED is expected to summon “some officials” involved with the decision taken by the then UPA government to merge the two State-run airlines, and procure and lease 111 airplanes which allegedly caused “huge” losses to the public exchequer and benefitted foreign aircraft manufacturers.

Last year, the CBI registered four cases in connection with the alleged scam in the airlines merger and aircraft deals, against unidentified officials of Air India, Ministry of Civil Aviation and others on charges of criminal conspiracy, cheating and corruption under various sections of the Indian Penal Code.

One of the four FIRs, registered by CBI against unknown officials of Air India, German firm SAP AG and global computer major IBM, pertained to alleged irregularities in procurement of software worth Rs 225 crore by the national carrier in 2011.

CAG finding

The CAG had in 2011, in its report, questioned the rationale behind the government’s decision to order 111 airplanes, which included 48 Airbus and 68 Boeing, for the Air India and Indian Airlines for about Rs 70,000 crore in 2006.

Calling the government's decision a “recipe for disaster”, the national auditor had also said the deal should have raised “an alarm” in the Civil Aviation Ministry, Public Investment Board and the Planning Commission.

“The financial case for the merger was not adequately validated prior to the merger.” the CAG had noted.

Nationalist Congress Party (NCP) leader Praful Patel was the Civil Aviation Minister when the aircraft were procured.