Cairn makes damaging remarks on India’s handling of Air India

NEW DELHI:  If Air India was run as a truly independent juridical entity, it would have gone out of business well over a decade ago, but it is kept in existence only to further India’s interests —Cairn Energy Plc has made some damaging remarks like this on Air India and the way the government had run its day-to-day operations in its submission to the US court.

The UK-based energy giant sued Air India in a US court to recover the $1.2 billion arbitration award that it won against India in the retrospective tax dispute case.  Cairn has made a submission in the court that Air India is the alter ego of India and that it should be held jointly and severally responsible for India’s debts.
In the court filing, a copy of which is with The New Indian Express, Cairn has said that India does not observe corporate formalities but rather stacks the board of Air India with politicians and civil servants, all the while India dictates the airline’s everyday policy decisions at every level. It went on to add that government revenue including the revenue taken from Cairn Energy is funneled into Air India to keep “this unprofitable enterprise running”.

In its court submission, Cairn Energy has given five reasons as to why Air India should be held liable for the outstanding dues of the Indian government. Cairn argued that only does India support Air  India financially through grants, capital contribution, guarantees, loans, and special tax treatments, but India essentially controls Air India’s access to other sources of funding, including private bank loans, Air India’s earnings from air service operations, including by regulating fares and routes, as well as Air India’s spending. It added that Indian government officials manage the airline and control its day-to-day operations. “India appoints Air India’s leadership, sets their pay, and has the power to remove them from their position.

Unsurprisingly, this has led to an Air India Board of Directors dominated by government officials, and to the prompt removal of Directors or managers who criticize India’s micromanagement of the airline,” it stated in its filing. The third reason it gives is that all of Air India’s profits and losses are borne by India, the government even guarantees loans of Air India. In  return, says Cairn, Air India provides India with valuable services by upgrading government employees’ tickets  for free, delaying collection of outstanding payments, and purchasing specially made  aircraft exclusively for government VIP service. 

Fourthly, India forces Air India to undertake uneconomic transactions to accomplish foreign policy goals, to fly routes that generate more losses than revenues for its own political and diplomatic purposes, and to give government officials perks on its airlines. And lastly, it noted that the distinction between Air India and India is illusory, and respecting those differences would inequitably allow India to shield its assets from creditors.