The Parliamentary Standing Committee on Transport, Tourism and Culture said, "As a result, the entire process has, in fact, been unduly delayed, if not derailed."
The committee noted that the decision lacked home work and had required consultation.
The two national carriers were merged in March 2007.
The Committee, headed by senior politician Sitaram Yechury, looked into the merger of the two airlines and its impact on the domestic aviation industry.
"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