Air India and Hydrocarbon losses – “Honest” PM Manmohan Singh

“Honest” PM Moneymohan Singh in action yet again. For an economist, seems surprisingly ignorant of profit/loss economics when it comes to serving the CONgress party. But wait! Profit for the party and loss for the country!

On December 30, 2005, the United Progressive Alliance government moved uncharacteristically fast. Prime Minister Manmohan Singh concurred with a note sent by a select group of ministers on a commercial contract on the very day it reached his office.  Soon after, the aviation ministry under then minister Praful Patel informed the national carrier Air India about Singh’s decision. Air India promptly acted on it – all on the same day.

This contract was a Rs 33,197-crore deal Air India , signed with Boeing and General Electric to buy 50 planes. The sequence of events on that winter day is marked in red in a recent audit report of the aviation sector by the Comptroller and Auditor General, or CAG.

As it turned out, the plane acquisition deal triggered Air India’s nosedive. At the time of the deal, the airline was still in the black, with a net profit of Rs 96.3 crore on an income of Rs 7,630 crore in 2004/05. The airline had a Rs 1,801 crore balance sheet, of which debt was Rs 1,262 crore. Five years later in 2009/10, it would report a loss of Rs 5,552 crore – about twice the size of Sikkim’s economy – on an income of Rs 13,402 crore, along with a staggering debt of Rs 38,423 crore.

The single-day clearance is one of a number of dubious government decisions highlighted by the report. Similar revelations have also been made in another CAG report on the hydrocarbons sector. Both strongly criticise the government’s functioning, pointing out failures and systemic flaws in its processes.

http://businesstoday.intoday.in/story/cag-report-indicts-civil-aviation-and-hydrocarbons-sectors/1/18990.html

Tweet