Plan panel okays IA's fleet acquisition plan

Planning Commission approves plan

The Planning Commission has cleared Indian Airlines' fleet acquisition proposal, which means the airline may soon be able to place orders for 43 new aircraft.

With this clearance, the crucial meeting of the Public Investment Board, involving senior officials of the civil aviation and finance ministries along with Planning Commission personnel, can now clear the plan, according to government officials.

The civil aviation ministry had revived the Rs 10,089 crore fleet acquisition proposal for Indian Airlines last week after having complied with the objections raised by the Planning Commission.

There had also been preliminary meetings between senior officials in the finance and civil aviation ministries on the critical issue of providing a government guarantee to the airline, the sources added.

Officials in the ministry of civil aviation said in the light of the Naresh Chandra Committee report on civil aviation policy, which had recommended acquisition of new aircraft to enable speedy privatisation, the chances of the proposal getting an approval were now better.

Once the Public Investment Board approval is obtained, the civil aviation ministry can then move a note for the Cabinet to approve it.

The pre-PIB meeting for the 43 aircraft fleet acquisition had been held in April this year, but without the participation of the Yojana Bhawan officials.

Sources said the commission had said since the state-owned carrier's net worth had turned negative, it would be very difficult to raise the finances required to fund the buying plan.

Financial consultants involved with the project had also said without a government guarantee, the cost of raising finances for the project would be very steep.

With Indian Airlines managing to trim its net loss by 20 per cent to Rs 196.56 crore for the financial year 2002-03 as compared with Rs 246.75 crore in 2001-02, and registering an 8 per cent increase in its operating revenue for 2002-03 to Rs 4,071.72 crore, there was a rethinking on the acquisition plan.

The civil aviation ministry had meanwhile got in touch with Boeing and Airbus to revise their initial offer price.

In March 2002, the Indian Airlines board of directors had approved the acquisition of 43 aircraft of the Airbus A-320, A-319 and A-321 models.

In October this year, Boeing had suggested that the entire project cost can come down by several hundred crores due to the market situation after 9/11 and an enhancement in technology. But neither the ministry nor Indian Airlines have asked for re-bids and have only asked for an extension of bids in September 2003.

The expansion route

• IA board clears Rs 10,089 crore plan for acquisition of 43 new aircraft in March 2002
• IA removed from disinvestment list early this year to facilitate fleet acquisition
• Pre-PIB meeting clears the proposal in April 2003
• IA asks for extension of bids in September 2003
• In October 2003, Boeing says project cost can come down in the post-9/11 scenario and due to technological advances