CBI registers enquiry to probe Air India-Indian Airlines merger

NEW DELHI: The CBI has registered three FIRs against unknown officials of the civil aviation ministry and private persons for alleged irregularities in UPA government’s purchase of 111 aircraft for Air India and Indian Airlines at a cost of Rs 70,000 crore, leasing of a large number of aircraft by AI without due consideration, and surrendering of the debt-ridden carrier’s profit-making routes and schedules to benefit private players.In addition, the agency has launched a preliminary enquiry (PE) into the 2007 merger of the two public carriers, IA and AI, to ascertain whether the matter needs to be probed further by registering an FIR. The merger followed the decision to place huge orders with Boeing and Airbus, a decision which the agency alleged cost the exchequer “tens of thousands of crores”.CBI had been directed by Supreme Court to probe the decisions based on a PIL filed by activist lawyer Prashant Bhushan. It said that in its three FIRs and one PE, it has booked unknown officials of the civil aviation ministry, Air India and unknown private persons for criminal conspiracy, cheating and under the prevention of corruption Act.About the purchase of 111 planes, CBI officials said the original proposal was to buy a total of 28 planes for Air India and Indian Airlines. But the government finally decided to buy 68 for Air India from Boeing, and another 43 for Indian Airlines from Airbus.The twin decisions triggered a controversy, with the Comptroller & Auditor General (CAG) terming the decision to purchase planes through debt a “recipe for disaster”, noting that the decision was taken when the airlines were “in a crisis”. The federal auditor also criticised the decision to lease planes, saying they were leased from private operators even while the process to acquire new planes was underway.The CAG criticised the merger as ill-timed and said that the financial case for merger was not “adequately validated”.CBI said the FIRs were based on the preliminary inquiries it conducted in the light of the SC’s directive and the findings of the CAG and Parliament’s Public Accounts Committee, which was also critical of the decisions. “The acquisition was done to benefit private companies,” CBI alleged in its FIR into the acquisition of planes.“The entire acquisition (for both Air India and Indian Airlines) was to be funded through debt (to be repaid through revenue generation), except for a relatively small equity infusion of Rs 325 crore for Indian Airlines. This was a recipe for disaster and should have raised alarm signals in ministry of civil aviation, Public Investment Board and the Planning Commission", the CAG report had stated.It further said: “This increase in numbers does not withstand audit scrutiny, considering the market requirements obtaining then or forecast for the future, as also the commercial viability projected to justify the acquisition. The acquisition appears to be supply-driven."CBI’s second FIR has been registered to probe what it called “irregular leasing of large number of aircraft by Air India without due consideration, proper route study and marketing or price strategy”. The decision benefited private carriers, the CBI allegedThe third FIR has been lodged to investigate AI for giving up profit making routes and timings in favour of national and international private airlines, which again led to a huge loss to the national carrier but came as a boon to private operators.Sources said the PE into the decision to merge the two airlines – the process for which started on March 16, 2006 – would focus on those who were running the civil aviation ministry at the time. Subsequently, a presentation was made to Prime Minister Manmohan Singh on March 22, 2006, in which the chairman and managing directors of Indian Airlines and Air India, the deputy chairman of the Planning Commission and the civil aviation secretary were also present.The move to merge AI and IA was initiated in 2006 by the civil aviation ministry under Praful Patel and was cleared by a group of ministers which included Pranab Mukherjee and P Chidambaram , before being formally approved by the Manmohan Singh Cabinet.