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BUSINESS: AIR-INDIA
Crash Landing
The MD's suspension has highlighted the rot in India's
flag carrier and conflict over its future
By V. Shankar Aiyar
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OFF LOADED: Mascarenhas' suspension came six months before his
retirement
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The world's most staffed, least utilised, smallest
and most aged international airlines, Air-India has just added another
feather to its cap. For the first time in its history, its managing director,
Michael Mascarenhas, was suspended on the charges of corruption. That
too some four years after he-along with three other airline officials-are
alleged to have committed an irregularity.
The trouble for Mascarenhas began in August
2000 when the Civil Aviation Ministry asked Air-India's Chief Vigilance
Officer (CVO) M.B. Sagar to investigate the apparent favours granted to
a UK-based general sales agent (GSA) of the airline, Welcome Travel. The
investigation was completed in October 2000 and it found Mascarenhas guilty
of paying the GSA a higher productivity-linked incentives (PLI) than was
paid to other agents. The favour cost the airline Rs 2.79 crore.
PLI are commissions offered by airlines to travel
agents to attract more passengers. The PLI rate usually rises proportionately
with the number of tickets booked by the agent. The charge against Mascarenhas
is that not only did he increase the maximum PLI rate from 5 to 7 per
cent, but he also decreased the limits for different slabs to enable Welcome
Travel to qualify for higher PLI. While industry norms specify an incentive
of 9 per cent, airlines often dole out a bonus as a marketing tool to
combat competition and to retain market share. Mascarenhas justified revising
the PLI claiming a fall of 42 per cent in capacity allocation on the India-UK
flights. But the CVO report found that the fall in capacity was actually
only 3.5 per cent.
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COLLISION COURSE
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JULY
1997: Mascarenhas accused of favouring
Welcome Travels with a higher productivity- linked bonus.
OCTOBER 2000: AI's inquiry finds
the travel agent has been unduly favoured at the cost of Rs 3 crore.
NOVEMBER 2000: Mascarenhas justifies
the bonus citing a 42-per cent drop in UK-India traffic.
APRIL 2001: CAG states the payment
is not justified and finds Mascarenhas' reply untenable.
MAY 23 2001: Mascarenhas is suspended.
A CBI inquiry is ordered into the Rs 57-crore "irregular"
payment to the agent and Rs 300 crore lost in a wet lease of Caribjet
aircraft.
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Worse, according to the report, this was not
the first time Mascarenhas and three other airline officials H.S. Oberoi,
Captain Behari and P.K. Sinha-were involved in granting such favours.
In 1992-93 too, when Mascarenhas was commercial director, the PLI had
been hiked from 3 to 5 per cent. The killer fact is that in April 2001,
a Comptroller and Auditor-General of India (CAG) report agreed with the
findings of the CVO. In fact, in a letter to the ministry dated March
15, 2001, CAG has maintained that excess payment of PLI amounting to £10.79
million (Rs 57.02 crore) has been made to GSA during 1987-2000 in violation
of the terms signed in 1986 with the GSA.
While Mascarenhas dubs the suspension "as
highly irregular and based on charges with obvious mala fide", clearly
one cannot term the CAG report partial or biased, which the CVO report
could have been. Besides, the CBI has been entrusted with another investigation
into the findings of CVO and CAG reports. In addition, the CBI will also
probe the alleged loss of Rs 300 crore due to the wet lease of a Caribjet
aircraft in the mid-1990s.
Some aviation observers see in Mascarenhas'
suspension, just six months before he was to retire, a reflection of bigger
problems between the brasses of Civil Aviation Ministry and Air-India.
It is no secret that the Civil Aviation Minister Sharad Yadav and Mascarenhas
have not shared the best of relations. Be it the transfers of three senior
directors by the ministry or the reappointment of director V.K. Verma.
Mascarenhas has been vocal about his stand that it was his prerogative
to post directors. To top it all, for three weeks Mascarenhas refused
to sign the orders to reappoint Verma in May in defiance of the ministry's
orders.
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