Date:03/08/2005 URL: http://www.thehindubusinessline.com/2005/08/03/stories/2005080300350300.htm

Back Govt decision could expedite fleet acquisition plans of IA, Air India

Ashwini Phadnis

New Delhi , Aug. 2

THE fleet acquisition plans of Air India (AI) and Indian Airlines (IA) could soon be back on the fast track. The Government is having a rethink on the proposal to set up a Group of Ministers or a Committee of Secretaries to have another look at the price negotiations for the fleet acquisition plans of the two airlines. Official sources said that in the case of IA, the $2-billion 43-Airbus aircraft acquisition process has not only been cleared by a high-powered committee that included three Secretaries to the Government including the Expenditure Secretary but also by the oversight committee headed by the former Comptroller and Auditor General of India, Mr C.G. Somaiah.

"There was no reason for the negotiating committee to conclude the price negotiations unless they felt that this was the best. There was no cap set on what the price should be or the amount of discount that should be bargained for," the officials said.

The Minister for Civil Aviation, Mr Praful Patel, had written to the Prime Minister, Dr Manmohan Singh, asking for the setting up of a GoM/CoS after the Finance Ministry asked for another relook at the cost of acquisition of aircraft for IA.

Apart from the Finance Ministry, the issue of pricing was also raised by some MPs who questioned whether the airline had managed to get the best possible price in view of reports that a low-cost airline in the Far East had managed to negotiate a better price.

Interestingly, in November last year the IA proposal was cleared the public investment board (PIB) under the Finance Ministry, which even agreed to provide a sovereign guarantees to finance the acquisition of aircraft. Sources said that though no final decision had yet been taken on the issue of setting up a committee to review the acquisition proposal, a decision was likely soon.