Around Christmas time in 2010, Praful Patel, the then civil aviation minister, hosted a party for top employees of Air India at his upscale Mumbai house. An exotic tree—the centerpiece in his rooftop garden—elicited a lot of interest. Praful reportedly told everyone that he had it transported from Bali on board a special Air India flight.
A relatively minor act of misdemeanour by the suave Praful, it may not have found its way into the scathing report put out less than a year later by the government’s auditor. There was already enough for the CAG to sink its teeth into: its 2011 report came down heavily on Air India, its management and the ministry of civil aviation for various acts of omission and commission that landed the national carrier in a morass of debt that has now swelled to over Rs 50,000 crore. Praful was the minister in the cockpit from 2004 to 2011—the major duration of the UPA’s two terms in power.
The chickens have now come home to roost. Three separate FIRs—all naming Praful as the man at the helm—have been registered by the CBI. This follows a Supreme Court directive in January 2017, based on a PIL filed by activist-lawyer Prashant Bhushan, regarding the purchase of 111 aircraft at a cost of Rs 70,000 crore. Air India had purchased 68 aircraft from Boeing, and Indian Airlines had picked up 43 from Airbus Group SE.
In a parallel, seemingly unrelated development, the debt-ridden AI is back in the market with the government announcing an intention to disinvest/privatise. AI employees and officials are surprised by the sudden move, coming as it does at a time when the airline had stabilised and started registering an operational profit. Recently, it announced seven new flights to Washington, Copenhagen, Stockholm, Houston, Los Angeles, Tel Aviv and Nairobi. In 2016, it started flights to Vienna, San Francisco, Madrid and a flight to Newark via London from Ahmedabad.
AI’s return to profitability was even acknowledged by Prime Minister Narendra Modi in his 2016 I-day speech. “Air India was infamous for incurring losses. My government has succeeded in bringing Air India to a situation of clocking operational profit,” he had said. The airline had posted an operational profit of Rs 105 core for the year 2015-16. The buzz within AI is that the government was perhaps waiting for the national carrier to become profitable so that it could get buyers easily. “A dead organisation was just beginning to show signs of revival. It is unfair to try and sell it in such an unceremonious manner just when things were looking up,” says a senior AI official.
In a letter signed collectively by employees as ‘Team Air India’ on May 29, they wrote to Union finance minister Arun Jaitley: “You have chosen to attack my company at a time when we were rebuilding its broken hull. Broken, I might add by a twisted bunch of politicians who ruled this country from 2004 to 2014 (UPA I-II).” The employees claim they are being targeted for no fault of theirs.
The EGoM document that cleared AI’s costly purchase order
In the letter, a copy of which was sent to the PMO, they lament that no one registered their dissent when they opposed the UPA government’s decisions at that time. It was a longish list: “…the largesse of the then civil aviation minister bestowing our routes to other nations without reciprocity or allowing Cabotage and Fifth Freedoms to other carriers…the wanton purchase of such a large number of aircraft on government debt…gifting away our bilaterals and routes and, most importantly, the illogical and questionable merger of AI and Indian Airlines.”
Coincidentally, it’s on the same day, May 29, that the CBI registered the three FIRs against “unknown officials of ministry of civil aviation, government of India, Air India, and unknown private persons”, investigating all the decisions the AI employees say they had opposed. The cases pertain to purchase of 111 aircraft, leasing of aircraft, and handing over of lucrative international routes to private airlines. The AI-IA merger is also being investigated in a separate case registered as a preliminary inquiry. Praful’s name figures in all three FIRs as part of allegations made by the Centre for Public Interest Litigation before the Supreme Court.
According to one of the FIRs, “It has been alleged by the petitioner that (the) ministry of civil aviation under Shri Praful Patel…by abusing (his) position as public servant in conspiracy with other public servants and private domestic and foreign airlines, made the national carriers give up profit-making routes and profit-making timings of AI in favour of national and international private airlines, causing a huge loss of marketshare.... Such acts of commission were made on extraneous considerations, causing immense loss to the national carriers and pecuniary benefit to private domestic/foreign airlines.”
Another FIR, pertaining to the purchase of aircraft, says the CBI is probing allegations that AI, with only a slender profit of Rs 100 crore to show on its books, simply did not have the capacity to purchase even a few aircraft and immediately went into huge losses on account of that decision—now mounted to tens of thousands of crores. “The decision benefited foreign aircraft manufacturers and caused loss to national carriers,” it says.
The CAG report had also red-flagged the purchases, saying the “acquisition appears to be supply-driven”. Since the entire acquisition was to be funded through debt (to be repaid through revenue generation), except for a relatively small equity infusion of Rs 325 crore for IA, “this was a recipe for disaster ab initio and should have raised alarm signals in MoCA, PIB (Public Investment Board) and the Planning Commission,” it said.
No alarm bells rang. In fact, all bodies with a regulatory mandate seem to have gone along with the acquisition. Praful, contacted by Outlook, simply reiterates that all decisions were taken “collectively and by multi-tiered processes”. Not bothered about the probe, he says it is actually a good move. “There has been speculation for long. It will be good to have an investigation and put the issue to rest.”
“They were all major decisions, consciously taken. The purchase order was cleared by an empowered group of ministers headed by P. Chidambaram and approved by Pranab Mukherjee, and ratified by the cabinet. A sovereign guarantee had to be given by the government for purchase of the aircraft. Not a single decision was mine alone. The decision does not even have my signature. It was signed by Chidambaram,” he says.
On AI’s privatisation, Praful says he too had proposed this but then prime minister Manmohan Singh had shot it down saying it must continue as a public undertaking, and even the Left that supported the UPA would not have agreed to it. “I think the government should privatise it if it gets a good buyer,” he says.
Former AI executive director Jitender Bhargava, who wrote The Descent of Air India, feels the government should not act in haste. “There is no point in harping over a Rs 50,000 crore debt. The assets of AI—and that is excluding its aircraft—would be more than Rs 50,000 crore. It’s still a valued brand. The Maharaja will be valued much higher than Kingfisher,” he says. It has assets, brand value and is a running company. Bhargava says all options should be explored, including putting the company on the stockmarket and making it a public limited company like ITC and Coal India, or debt restructuring by turning part of it into equity and renegotiating terms with banks. “The government must have a hands-off policy with AI; it should be managed professionally keeping commercial interests in mind,” suggests Bhargava. It’s a thought. After all, most business acumen that went into AI was apparently about shoring up the commercial interests of other entities.
