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Report No. 10 of 2010-11 – Performance Audit of Activities Public Sector Undertakings

Date on which Report Tabled:

Thu 05 Aug, 2010

Date of sending the report to Government

Government Type

Union

Union Department

Commercial

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Sector Industry and Commerce

Overview

This volume of Audit Report contains reviews on 10 selected areas of operation involving 18 Public Sector Undertakings under 10 Ministries. These areas were selected in audit for review on the basis of their relative importance in the functioning of the concerned organisation. The total financial implication of these reviews is Rs. 6305.73 crore.

National Aviation Company of India Limited (Company) was incorporated on 30th March 2007 under the scheme of amalgamation of Air India Limited and Indian Airlines Limited. Erstwhile Indian Airlines Limited established (1991) a Jet Engine Overhaul Complex in Delhi (JEOC) and Air India had set up (1962) an Engine Overhaul Department in Mumbai (EOD). The Shops were certified by the Federal Aviation Authority (FAA), USA which enabled the Company to undertake the repair works of engines of other operators.

Against the capacity to overhaul 48 V2500 engines per annum, the JEOC could utilize its capacity between 67 per cent and 83 per cent only, during the period 2004-05 to 2008-09. Due to lower production of engines, aircraft ranging from one to eleven were on ground for 1370 days during the above period. Thus, the Company lost potential revenue of approximately Rs. 291 crore.JEOC was unable to produce engines as per requirement during the period September 2005 to December 2006. To overcome the shortage, the Company had to take engines on lease. The Company incurred an extra expenditure of Rs. 34.68 crore on hiring of engines.Despite having in-house capability, the Company sent 23 engines and 18 HPC modules from JEOC to outside agencies for repair and incurred an expenditure of Rs. 498.66 crore, including an avoidable expenditure of Rs. 45.95 crore towards labour, transportation, mark up on material and testing charges.The Company carried out phoenix modification introduced by engine manufacturer M/s IAE in all of its engines at JEOC at a cost of Rs. 67.31 crore. It was, however,observed that on-wing life of the engine did not increase to the assured level and the envisaged benefits of reduction in maintenance cost were also not reaped.EOD, by and large, utilised its capacity fully during 2004-09.

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Report No. 10 of 2010-11 – Performance Audit of Activities Public Sector Undertakings
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