Air India's loss widens to Rs 57 bn in FY17 from Rs 38 bn in FY16

Air India's provisional loss for FY17 was Rs 37.28 bn; officials say the inflation in losses is likely due to certain non-disclosures by the company in the provisional figures

Contrary to popular belief that Air India made a turnaround under the current National Democratic Alliance government, figures show that its loss widened instead. According to figures provided in Parliament by minister of state for civil aviation Jayant Sinha, the state-owned carrier registered a loss of Rs 57.65 billion in FY17, Rs 19.29 billion higher than Rs 38.36 billion loss in FY16.
 
The figures reflect significant deviation from the minister’s own parliamentary disclosure on July 27, 2017. Sinha had then said that Air India’s provisional loss for FY17 was Rs 37.28 billion — almost Rs 20 billion less than the actual figure.
 
Questions sent to Sinha’s office didn’t elicit any response till the time of going to press.
 
Senior Air India officials said the inflation in losses is likely due to certain non-disclosures by the company in the provisional figures. “The original provisional figures were of conservative estimate. The new figures include additional provisioning arising out of the Dharmadhikari Report and demands from Serve from India Scheme (SFIS), which can no longer be utilised as the scrips have expired,” he said.
 
Total claim from SFISs amount to Rs 11,551.50 million.
 

This raises questions about the company’s accounting policy, as SFIS claims for airlines were discontinued by the government from January 2011. In fact, during its audit of the airline’s account books of FY15, the Comptroller and Auditor General (CAG) had pointed out this fact, saying that government clearance was necessary for renewal of expired scrip and issuance of scrips, which was not available with the company. “Hence, necessary provision should have been made for the expired and unapproved SFIS scrip claim amounting to Rs 11,551.5 million. However, this has not been done. Therefore, the loss of the company stands understated,” the CAG wrote.
 
The audit highlighted 14 instances where proper accounting process was not followed. Seven of them state that the airline had not followed the prescribed accounting standards; five are on non-provision of amounts as mandated by accounting standards; one qualification was on a change in accounting policy on inventory and one on certain balances not being reconciled.
 
The airline’s accounting process also came under scrutiny recently when Civil Aviation Minister Ashok Gajapathi Raju said that company’s debt could turn out to be 40 per cent higher than previously expected, as the airline’s books have not been evaluated properly. “When our exercise of calculating Air India’s debt began, we found that the sum was hovering around the Rs 50,000 crore (Rs 500 billion) mark. But I won’t be surprised if the total debt reaches Rs 70,000 crore (Rs 700 billion). Since people are looking at the books carefully, they may find more,” the minister had said.
 
The new figures contradict the government’s claim that the debt-laden airline was making a turnaround. In fact, Prime Minister Narendra Modi in his Independence Day speech had said: "Air India was notorious for incurring losses. My government succeeded in bringing Air India back to a situation where it is logging operational profits."