New Delhi: A parliamentary committee said that the government had blundered by merging state-owned carriers Air India and Indian Airlines and that the combined entity was “fast slipping into an abyss”, calling for a reversal of the decision.

“The so-called merger is a kind of marriage between two incompatible individuals having wide variances with hardly any meeting ground,” V. Kishore Chandra S. Deo, chairman of the Committee on Public Sector Undertakings (Copu), said in a 118-page report tabled in Parliament on Friday, three years after the merger took place.

“Multiplication of losses suggests something radically wrong either with the projections of the benefits of the merger or with the implementation of the merger,” he said.

Also See | Dismal Returns (Graphic)

Run by National Aviation Co. of India Ltd (Nacil), Air India, as the merged entity is known, is expected to lose Rs5,400 crore in the year to 31 March, aviation minister Praful Patel told Parliament this week, adding that “the trend of losses is likely to continue for few more years”.

The panel recommended turning Nacil into a holding company with two wings: Nacil-Indian Airlines, with its headquarters in Delhi, and Nacil-Air India, with its headquarters in Mumbai, each headed by a managing director and reporting to a common chairman. The panel criticized the civil aviation ministry over the move. “Having imposed the merger of the two carriers, the (civil aviation) ministry has shown little initiative in monitoring the progress,” the report said.

“We have given our findings and recommendations. It is up to the government to take action,” said Deo, a Congress member of Parliament, after tabling the report.

The panel sought “stringent accountability procedures put in place” and a “transparent review” by the aviation ministry of the route network and slot allocations because it says the public carrier has been “disadvantaged by allocation of prime commercial routes to private airlines like Jet Airways (India) Ltd, Kingfisher Airlines Ltd and Emirates”.

The panel also said that the carrier should stick by its word on wage cuts.

“Any cut or advancement should be proportionate to the scale of pay as it otherwise will be against the assurance that “no employee would be placed at a disadvantage at any stage”, which was communicated to the employees before the merger of the two organizations,” the report said.

Graphic by Ahmed Raza Khan/Mint

tarun.s@livemint.com