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2G not the only gem, Vinod Rai’s CAG had also come up with one on Air India

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CAG report emphasised that Air India was the ‘national carrier’, and argued for giving it ‘more than a level playing field’, despite all the ills plaguing it.

The 2G trial court judgment has raised new questions about the widely and wildly popular Comptroller and Auditor General (CAG) report estimating the loss from UPA’s spectrum allocation at Rs 1.76 lakh-crore. We should not forget that in that heady period, the holy CAG produced several such reports on issues seen as ‘mega scams’. Each such report led to much excitement. These included the Commonwealth Games, the Delhi airport privatisation and Air India.

In those furiously confused times, when fiction sounded sexier than fact, and when scorn and anger were the bottom line of every argument, I had examined these reports in detail, invoking Infosys founder N.R. Narayana Murthy’s favourite line: “In God we trust, all others must bring data.” The report on Air India, or more precisely the Ministry of Civil Aviation (MoCA), was among the CAG’s big bestsellers. So let us start examining the CAG of India. Pick up that report again now, and read it with me so you can see the yarns of fantasy being woven. Samples:

“MoCA and Government must recognise that Air India is the National Carrier (capital letters auditor’s). In very many ways, it is a symbol of the State. Even if Minister and officials in MoCA prefer not to be Minister/officials of AI alone, the fact remains that it has to be given more than (emphasis mine) a level playing field now which it has not been given. All decision to allot routes, alter timings, provide first of refusal rights on domestic and international routes must be made taking into account the interests of AI. This should be done in a transparent and demonstrable manner, placing it in public domain.”

Further, the CAG adds firm, sage advice. “A total hands-off approach with regard to the management of the airline is required.”

Now, there is much in these conclusions we would agree with. A hands-off government for one. And there is more. For example, the assertion that Air India is a symbol of the ‘State’. A more incontestable truth has not been spoken. Because it is, in so many essential ways, just like the Indian state—slow, unwieldy, chronically delayed and unreliable, rude, arrogant, good for nothing, and due for an overhaul and reinvention.

But note that among all the negatives we have listed, the word ‘corrupt’ does not feature. This is not to say that our State is not corrupt. It is amongst the most corrupt in the world. It is just that there is nothing in this CAG report of 122 pages that calls anybody corrupt, discovers any money loss, or even hints at any. It does talk about inefficiency, callousness, disastrous management, delays, and how an airline that makes a near loss on every single route it flies rewards its own (employees, not customers, silly!) with generous ‘performance-linked’ incentives, converting itself into a taxpayer-funded gravy train, the likes of which is unlikely to be matched even if our country were to return to old public-sector socialism.

Again, see the remedy the auditors suggest. First of all, they remind the government that Air India is our “National Carrier” and a symbol of the State: as if it was the Indian Air Force. Then, they ask for a “more than” level playing field, and tell the government exactly how to do it: just mess with all routes, schedules, even timings, in such a way as to benefit Air India and screw the rest, particularly the fare-paying passenger. A “more than level playing field”? Are you listening to a clinical auditor, or an Air India union leader who wakes up between two strikes to pen this silly piece of anti-reform, anti-consumer, statist, headline-hunting rubbish?

You may accuse me of selectively picking one paragraph from an unthinking bureaucratic homily, and damning 122 pages of blood, sweat and tears. And you may indeed be right. Because there is much, much else in the report that is revealing, startling and factual. Since we said we will stick to data, here are some examples.

1. The more Air India flies, the more money it loses, even on routes where it has a state-mandated monopoly. For example, the India-US non-stop routes, the fanciest addition to its schedule. The loss on just this route increased from Rs 552 crore in 2005-06 to Rs 1,522 crore in 2009-10, as frequencies increased. This route had, until then, been denied to Jet and Kingfisher, thereby creating a monopoly of six years already.

2. The plane-load factor (PLF) for Air India/Indian Airlines in this period remained stagnant at 68.8 per cent, while all private carriers registered an increase. And perhaps by ‘oversight’, the CAG had forgotten to even take notice of the fastest growing domestic carrier, Indigo.

3. Even market share in cargo operations saw a decline from 36.8 to 26.5 per cent, even as private carriers increased theirs. This, when the “national carrier” had already given itself a “more than” level playing field by converting two old, fully depreciated Boeing 737s into freighters. You want to see a scandalous fact, turn to page xvi of the executive summary.

Rs 168.3 crore was spent on this conversion. And what did the two planes achieve? A loss of 270.62 crore.

Who is to blame for this? The accountant wouldn’t say. He only wanted his headlines.

4. As the state carrier lost its market share across the board, see how premium passengers dumped it. Even by 2004-05, it had lost most of its business-first traffic, and filled only 14.4 per cent of first-class seats, each of which, the auditor sagely tells us, could make up for several empty seats in Tharoor’s cattle class. For business, the number declined from 31 to 27.7 per cent, and even in economy from 74.6 to 67.7. You want to know why, read on from the CAG.

5. The on-time performance of the state carrier was lower than any other airline’s except Kalanidhi Maran’s Spicejet then. Its 74.6 per cent for domestic and just under 60 per cent for international routes competed with private airlines that ranged between 85 and 91 per cent on-time efficiency.

6. No wonder a passenger survey quoted by the CAG in this report told you the state carrier is “apathetic, grudging, dirty, unpleasant, unresponsive” and so on, compared to Kingfisher, Jet, Singapore, Lufthansa and British Airways, which are “friendly, obliging, well-dressed, classy, polished, hospitable” and so on.

And who does the auditor blame all this on? Don’t ask the corruption-fighter.

7. Since the blame is put on “competition” and non-availability of a “more than level playing field”, see what happens when Air India is given state-mandated monopoly: for example, the route to Riyadh, which was barred to Indian private carriers. CAG tells you the airline had 372 serious delays/misconnections/rescheduling on this route in 2006-09, and PLF fell from 81.4 to 63.6 per cent. And what happened when it increased its flights to 1,621 in 2009-10? There were similar delays, misconnections etc on 232 occasions!

So, who do you blame for all this? If you just read these examples, and indeed, most of the rest of the report, you’d say the consumer. It is the paying customer who, given the choice now, has voted with her feet. And what does the auditor say?

The auditor consumes page upon page desperately looking for faults in the buying of planes for Air India. But he finds no evidence, except the incredible suspicion over the fact that the process was completed “too fast”, as in four months. Indian Airlines, meanwhile, suffered, the CAG says, because the government took too long to buy planes. Then it rues the loss of Rs 200 crore because the government took 117 days to grant sovereign guarantees the airline needed for loans to buy its planes. If this had come in a fortnight, would it have been “too fast”? What kind of delays does the auditor consider “normal” in government processes to avoid suspicion? Does he want speed, or does he want delays? He is, in fact, complaining about both, speed and the lack of it. Heads or tails, the auditor always wins.

You have to say the auditor does a decent job of ferreting out the facts on what ails the state carrier. Except, he goes on to state his preconceived conclusions even if facts point to the contrary. He blames reforms for everything. Oh, reform is fine, he says, but it was “untimely”. So what should have been done? Delay it all, not even until the state carrier acquired its new planes and modern new airport hubs were built in Mumbai and Delhi, but not until the carrier had got a headstart of “two to three years” to settle its operations?

If you don’t believe me, please read that report. It’s available on the internet. The CAG did recommend a delay of many years before starting aviation reforms. This was a thought straight out of the Swadeshi Jagran Manch. That means all reform and opening up should have been delayed by a decade. And all of it to save a PSU that is “rude, apathetic, callous” (CAG’s words, not mine) and so on.

Read also its prescription in the report. Effectively, stop all reform and opening up. Not only that, “roll-backs” where foreign carriers have been given “too liberal” rights to fly out of India.

So burn up your Emirates, Gulf Air and Singapore Airlines frequent-flier miles. Because Stalinists are coming.

This CAG report on civil aviation and Air India under Vinod Rai was not about corruption. There wasn’t even a vague insinuation linking another usual suspect, Praful Patel, with anything. It only told you what happens when the sarkari empire strikes back to protect its own at the cost of you and me, the paying passenger and tax-payer.

Of course, that didn’t stop anybody from waving it at prime time, and screaming the CAG had broken one more set of scandals.

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21 COMMENTS

  1. Shekar himself has grown kowtowing politicians and is now giving gyan he is typical Lutyen lootera hanging and India habitat n sounds talk sense

  2. It’s a badly written article with lot of bias. Paragraphs from CAG’s reports appear to be quoted selectively and out of context to make a critic’s story just for the sake of it. Mr Gupta, have you ever praised any report of the CAG? There are hundreds of reports that are printed every year and bring to public notice weaknesses and the rot existing in governance system. We need to strengthen the institution of CAG instead of criticising and weakening it for the pleasure of those in power.

  3. I’m confused. Is this an Indictment of the Media for crying Corruption in Prime Time when the report was pointing to none? Why blame Rai then?
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  4. Shekhar Gupta just wants to stir, whatever the pot. This is an immature piece of writing whose sole objective is perhaps to paint CAG in black, not even grey. As per his own admission, CAG did point at the ills afflicting the Air India. So is that a bad job? CAG’s panacea may not be ideal because they lack expertise in that. But to denigrate CAG for 2G scam reports is crass. Shekhar Gupta’s immaturity in this writing lurks out from the choice of his words to describe CAG- accountant, corruption-fighter. Crap that and I am aghast that he wrote them. See the contrary view written by TN Ninan in the same issue, whose writings on economic and business matters are class apart. Shekhar Gupta is good at political gup-shup but business/economic issues are beyond him.

  5. 2G rocked up parliament to topple Congress by BJP & allies but after verdict it is clear CAG’s findings are either suspicious or fabricated as scam. Now all pending scams to be well scrutinised before handing ovér to judiciary by CBI. It is imperative that PCAs are taken if there are flaws in the system

  6. Padma awardee former CAG Mr. Rai be requested to give his valued opinion on the acquittal in the 2G case. What went wrong? Why his calculations failed in the court?

  7. Mr Gupta, where were you all the years when nation was rocked with one scam and other during UPA Govt and CAG report indicated irregularities in its reports??

  8. This is the same Shekhar Gupta who in 2003 was demanding that India join the invasion of Iraq. His exact words:

    “It would be double dangerous now to be pushed, by entirely ignorant and non-serious politicians and a public opinion determined by touching emotion rather than cold reason, to be committed to a process of strengthening the UN, introducing new stresses on our relations with the US.”

    I have doubts about his sincerity and credibility.

  9. These auditors are the most corrupt class in accounts. When they come for audit, they want five star facilities, luxury cars for their stay and transportation. They raise objections just for the sake of it. Negativity is selling in this country like anything, be it audit or vigilance ot accounts departments.

  10. Seeing the collosal loss to our economy inorder to aid some political party and to create a hype, the ex CAG should be tried and a criminal case should be initiated against him in a special court so that the sanctity of the post is withheld.

  11. CAG is completly corrupt body and tries to show themselves as God under the guise of its constitutiinal status. Visit the government offices and ask the officers as to how they are working. I have good experience in the matter. If you call them blackmailer too , there will be nothing wrong. In this country, the more secure is more corrupt. To show there existance, they try to put the wrong picture. Very few are exceptionally are good and sincere ; and they are sidelined. This all will be going on as our people never appreciate right one and broadly our people are self centered.

  12. “In God we trust, all others must bring data” may have been said by NarayanMurthy but it is not his quote. The quotation should be attributed to Bernard Fischer, Chairman, National Surgical Breast and Bowel Project (reference Siddarth Mukherjee: Emporor of All Maladies).

  13. Well people should be given choice to fly which ever they like as it’s their right to choose and if air India cannot stand up to it’s loss … so stop this bullshit crap and Emirates , gulf are much better airlines to fly

  14. This article is a clear proof that the man was totally unfit and conspired with other Hindutva political parties to achieve political gains for them. Shut this Air-India now !! Stop looting tax payers money for Govt. of India officers and their wives.

    • He was ok but went berserk for his own colleague late R P Singh had questioned the whole computation as imaginary and sans logic – but

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