CAG asks govt why it bought 111 planes for Air India

New Delhi, Jan 30 (PTI) The Comptroller and AuditorGeneral (CAG) is understood to have questioned government''sreasoning to order 111 planes for Air India for almost Rs50,000 crore in 2006 and also why the MRO facility, which ispart of the offset clause, is yet to come up.

In an interim report, the CAG is learnt to havequestioned the need for procurement of such a large number ofaircraft and wanted to know the reasons for delay in settingup of a Maintenance, Repair and Overhaul (MRO) facility inIndia as part of the offset clause in the deal.

European aircraft manufacturer Airbus was to set up theMRO as part of the offset obligation for the erstwhile IndianAirline''s Rs 9,890-crore 43-aircraft acquisition proposal.

While all the 43 Airbus aircraft ordered by theerstwhile Indian Airlines have been delivered, 40 of the 68Boeing planes have been inducted in the fleet. The list priceof each of the Airbus A-320 family of aircraft and 68 Boeingplanes range between USD 37.34 million and USD 143 million.

The CAG is believed to have asked the airline and thegovernment whether they could justify the massive orderthrough a detailed business plan and give the reasons behindAir India''s dwindling market share, which has brought down itsposition to fourth, lower than the no-frill carrier IndiGo,Jet Airways and Kingfisher.

The government and the national carrier have alreadysent their response to the CAG. Being a state-ownedenterprise, the finances of Air India are audited by the CAG.

In response, the Civil Aviation Ministry is understoodto have said that ageing fleet was the prime reason forplacing a big order as competing airlines were taking awaypassengers through their new and young fleet.

On the MRO issue, the Ministry is believed to haveresponded by saying that the work was in progress.

The CAG is understood to have asked why the number ofaircraft ordered by the airline was increased to 50 when theGovernment was earlier planning to take 35 on firm orders andhave the option of taking another 15 at a later date.

It has also sought government''s response on why abridge loan was taken to finance the aircraft deal.

The CAG report, which is to be tabled in Parliamentsoon, is also said to have raised questions on the rationalebehind the merger process between Air India and IndianAirlines and talked about the poor financial performance ofthe merged company.

Since its merger in 2007, Air India''s decisions havecome under scathing attack from two parliamentary panels --the Committee on Public Undertakings and the StandingCommittee on Transport, Tourism and Culture.