In a report on Air India the CAG alleged that the expansion plans of the national carrier were not based on due diligence, and that the new aircraft should have been bought in two phases.
Air India has rejected the CAG’s contention that ‘defective contracts’ led to losses, saying the new aircraft were intended to meet the increased demand.
The government has also defended its decision to buy 50 aircraft from Boeing saying this led to huge bulk discounts. Recently, the Cabinet Committee on Economic Affairs approved a fresh equity infusion of 1200 crore rupees. Currently, the airline is laden with a cumulative debt of 40,000 crore rupees and as short-term loans to maintain its operations and posted losses of around 7,000 crore rupees for the last fiscal.