Published: Mon, March 20, 2017
Economy | By Annette Adams

Owned carrier Air India understated losses - federal auditor

Owned carrier Air India understated losses - federal auditor

The Comptroller & Auditor General (C&AG) has said the airline has been under-reporting its losses, neglecting to make provisions for routine stuff like outstandings to airport operators, and has been filling in excess valuation for some of its properties like the one at Baba Kharak Singh Marg in New Delhi.

CAG said this might result in another financial restructuring for the airline.

The CAG report tabled in the Delhi Assembly said advertisements worth Rs 24 crore released by it were in violation of financial propriety and Supreme Court regulations.

The north-bound graph of Air India's financial health has suddenly turned south, with central auditor CAG pointing out that the national carrier made an operating loss of Rs 321crore last fiscal as against the airline's claim of Rs 105 crore profit.

"The high volume of short-term loans had largely eroded the benefits of the financial restructuring carried out under FRP", it noted.

The report, which highlights several issues of social, general and economic sector of the Delhi government, also revealed that an additional cost of Rs 3.28 crore was also incurred for boundary walls, fencing, entry gates and security of the land pieces.

Losses were understated by US$219mil (RM975mil) in the year to end-March 2013, US$445mil (RM2bil) in the year to end-March 2014 and US$299mil (RM1.3bil) in the year to end-March 2015, the report said.

"For 2015-16 where Air India has reported an operating profit of approximately Rs 105 crore, the audit of Air India's standalone accounts for 2015-16 has been completed", Deputy CAG Pradeep Rao said.

The report said the airline should monetise more of its assets faster to reduce its debt burden and speed up the leasing of narrow-body aircraft to improve its performance.

The report adds that Air India incurred a book loss of ₹ 671.07 crore and payment of ₹ 324.67 crore on the sale of five Boeing 777-200 Long Range aircraft and payment of ₹ 324.67 crore towards interest on loans availed for procurement of these aircraft, the report points out. Another 169 services (56 global and 113 domestic) did not recover total costs, though they recovered variable costs, the report states.

Similarly, in 2015-16, the number further rose to 1.07 lakh at various levels.

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