EXCLUSIVE: CAG says AAI lost Rs 223 cr in revenue because it never raised bills

State-run AAI lost Rs 222.71 crore in revenue between FY2015-16 and FY2017-18 because it failed to claim it
EXCLUSIVE: CAG says AAI lost Rs 223 cr in revenue because it never raised bills

New Delhi: State-run AAI (Airports Authority of India) lost Rs 222.71 crore in revenue between FY2015-16 and FY2017-18 because it failed to claim it, the Comptroller and Auditor General (CAG) of India has said in its latest audit report. The amount pertains to penal interest on aeronautical dues owed by private airlines in the period between 2015-16 and 2017-18. Revenue of AAI consists of aeronautical revenue and non-aeronautical revenue. Aeronautical revenue, which consists of a bunch of charges levied by AAI for providing route navigation, terminal navigation, landing, parking and housing etc to airlines, is a major source of revenue for the public sector company.

CAG audit reviewed AAI revenue generation & realisation

The CAG audit reviewed revenue generation and realisation activities (aeronautical and non-aeronautical) of AAI over the period from 2013-14 to 2017-18. It noted in the audit report that the AAI management could not comply with its own credit policy and provisions of finance manual. The audit was focussed on four airports operated by AAI in the Northern Region — Amritsar, Jaipur, Lucknow, and Varanasi. It must be noted that out of these airports, Jaipur and Lucknow have been privatised and handed over to Adani Enterprises Ltd. And the government is also set to put the other two airports — Amritsar and Varanasi — up for sale to the private sector.

How much revenue did AAI lose year-wise?

The CAG report showed that AAI failed to claim penal interest of Rs 69.41 crore in 2015-16, Rs 75.06 crore in 2016-17 and Rs 78.24 crore in 2017-18. The penal interest pertains to aeronautical dues owed by private airlines. The audit also showed that between 2015-16 and 2017-18, the total aeronautical dues stood at Rs 1,376.66 crore. Out of this, AAI failed to realise more than of the total amount within the allowed credit period of 15 days, the CAG said.

AAI levied penal interest when parties sought no dues certificate

The CAG further noted that instead of claiming penal interest on delayed payments by raising bills on regular basis, AAI had been recovering interest for delayed payment only when the concerned parties approached AAI to obtain 'No Dues' certificate. "Due to non-compliance with the conditions stipulated in the finance manual, not only did AAI not recover penal interest on delayed payments as and when due, it also increased the risk of non-recovery from the parties who had stopped operations at airports," the CAG said.

What does the credit policy state?

As per AAI's credit policy for aeronautical dues (June 2007), schedule/non-schedule operators, willing to avail the credit facility, are required to furnish a security deposit (SD) in the form of cash or bank guarantee, equal to average billing of two months. In case of an increase in the operations of an airline, the SD is required to be enhanced proportionally. The idea is to ensure that dues do not exceed the SD at any point of time. However, that wasn't the case. The report said that SDs available with AAI remained short to the extent of Rs 152.37 crore at the end of FY2017-18. The credit policy also stipulates that a delay in payment should attract penal interest at the rate of 12 percent. However, AAI did not raise bills for interest on delayed payments by the airlines and lost the opportunity of earning interest to the tune of Rs 222.71 crore.

CAG says AAI's trade receivables higher than DIAL's

While comparing the operational efficiency of Delhi Airport International Limited and AAI as on March 31, 2018 , it was noticed that DIAL was being managed well in regard to realisation of its dues as it had only 14.78 percent of trade receivables to total operational income in comparison to 46.27 percent in case of AAI, the CAG said.

What did the management say?

In a response to the CAG, the AAI management said, "The Management in its reply on aeronautical dues (July 2017) stated that dues of most of the airlines were within SD. The Management also stated that the position of dues changed every minute and so did the requirement of SD. Further, the position has improved considerably and is still improving. AAI has taken various initiatives for technological upgradation to further improve the efficiency; the result of which will be visible in forthcoming years."

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)

PSU Watch