If you remove the window-dressing done by Indian Airlines' creative accountants, last year's loss was actually a little over Rs 13 crore. With the airline consistently making losses over the decade, it's hardly surprising that its net worth has shrunk dramatically, from Rs 560 crore in 1990-91 to around Rs 80 crore today.

So what did IA do to achieve last year's profits? Simple, it wrote back into its profit and loss account, an amount of Rs 18.8 crore that it had kept aside for a pension or superannuation fund for its employees. Apparently, IA had planned to create a company-funded pension scheme for its employees, but did not receive the government'spermission in time. So, whatever provisions had been made for earlier years were simply written back. Once this was done, operating expenses for the year simply, though artificially, got reduced by this amount.

The airline also managed to "save" another Rs 26.7 crore through a change in the accounting policy on aircraft spares. Earlier, spares were maintained and a provision for their obsolescence was made on the assumption that an A-300 and A-320 aircraft would last 15 years while the Boeing 737 would have a life span of 12 years. With auditors objecting to such large provisions in earlier years, IA's board approved of a change in the depreciation rates. With the average life of an aircraft now taken at 18 years, IA was able to lower its provision for obsolescence.

Similarly, it got another Rs 10.4 crore from a policy change in the treatment of bad debts. Under an earlier accounting rule, if any debt was outstanding for more than 3 years, it was to be considered a bad or doubtful debt, and in the profitand loss account, the company had to write it off. This policy was changed in 1997-98, and it was decided that outstanding dues of any government department or PSU would be treated as good debts unless it was specifically known that they would not be honoured - never mind if they had been outstanding for more than 3 years.

To be fair to Indian Airlines, none of these practices are actually illegal. Earning a profit of Rs 5 crore from the sale of aircraft engines and adding it to 1997-98's revenues, for example, is actually allowed under the Accounting Standards - in fact, in 1996-97, IA's losses would have been much higher if profits of Rs 44 crore from selling four second-hand Boeing 737 to various courier companies had not been added to that year's revenues. According to the airline's public relations director, in fact, its accounts for 1997-98 have not only been cleared by its own auditors, but also by the Comptroller and Auditor General of India.

So while it's unlikely that the airline will be hauledup for this, for Anil Baijal who's just inherited the airline, it means the airline's continued downslide remains unchecked.