The comptroller and auditor general (CAG) of India has criticised Air India for wasteful expenditure on accommodation for cabin crew. The company has been found wasting crores of rupees by hiring unreasonably expensive accommodation for its crew in hotels at Frankfurt and New York.

It has also been found that Air India did not finalise the tender for crew accommodation despite securing rates lower than what was being paid through existing contracts. The excess spending of the public sector carrier on this account is estimated at over Rs 12 crore.

Air India has incurred avoidable expenditure by not accepting the offer for a long-term agreement of the hotel providing accommodation to cabin crew, CAG said in its recent report. Air India had a contract with Intercontinental Hotel, Frankfurt, for accommodation at e99 a room per day.

As the contract was about to expire in December 2004, the company invited fresh bids to which 11 companies responded. The lowest bidder offered a price of e74. Air India, however, did not award the contract to the lowest bidder and renewed the contract of Intercontinental Hotel at a substantially higher rate. The company cited resistance of the All-India Cabin Crew Association (AICCA) as the reason for not going for new contract.

The audit team of CAG observed objections of the AICCA were unfounded. On this account, Air Indias excess spending was Rs 10.87 crore. When asked for the reason, the airline said that the lowest bidder did not qualify technically and the Central Vigilance Commissions guidelines prohibit contract to any party other than the lowest bidder. This meant Air India had to go for a fresh tender.

The airlines view was also endorsed by the civil aviation industry. The audit team had found the arguments untenable and asked the management the reason for not initiating a new tender.

In another case, the company has made an extra payment of Rs 1.33 crore for crew accommodation at New York. This payment could have been avoided by entering into a long-term contract with a hotel. The management has said they did not go for long-term contract because of objections from the AICCA.

The reply was not found tenable by the audit team and the matter has been referred to the ministry, which had not made the reply at the time of the preparation of the report.