Insurance for the VIP Bell 429 helicopter that ferries Punjab Chief Minister Parkash Singh Badal, Deputy Chief Minister Sukhbir Badal and other VVIPs has once again run into rough weather.
Ever since the state government purchased the US-made helicopter in 2012 at a cost of Rs 36.62 crore, the Punjab civil aviation department has been struggling every year with insurance bids and the valuation. It’s no different this year.
On November 20, the department of civil aviation had invited quotations for the insurance of twin engine seven-seater (including two seats for crew) helicopter a second time, days after it received only two bids, one by United India Insurance Company and other by HDFC ERGO General Insurance, on November 16, in response to its first advertisement for quotations on October 30.
“We did not open the bids as the Comptroller and Auditor General (CAG) could point out that there should have been quotations to make it a competitive bidding process. So, we invited quotations again. But the problem is that the insurance companies are not too keen on insurance of helicopters because of the number of crashes. The Katra crash (on November 23) will only discourage them more,” an official of Punjab Civil Aviation department told The Sunday Express.
The due date for renewing the insurance is January 1, 2016. “We cannot even start the engine of the helicopter in case we do not have helicopter insurance,” said the official.
The helicopter has been valued at Rs 38 crore, nearly Rs 1.4 crore more than its original cost. The civil aviation department justifies the increased valuation by including overhead expenses, such as assembling the chopper.
This is not the first time that insuring the VIP chopper has proved problematic. In 2014, after quotations were invited on November 6, only ICICI Lombard General Insurance Company submitted the bid, offering the insurance at a premium of Rs 34.56 lakh, an increase of more than Rs 10 lakh over the previous year by the same company. ICICI Lombard General Insurance Company had, according to civil aviation department officials, cited the rising number of incidents of air crashes to justify the increase.
Quotations were invited again on December 1, 2014 and by the cut-off date of December 10, as many as five companies submitted their quotations. ICICI Lombard did not budge from its quotation, followed by National Insurance Company (Rs 33.57 lakh). Eventually, the deal went to United India Insurance Company, which offered the insurance at a premium of Rs 19.96 lakh.
Part of the problem is that the the civil aviation department is unwilling to accept depreciation of the chopper’s value. In 2012, United India Insurance Co had done the insurance at a premium of Rs 27.69 lakh against the chopper’s valuation at Rs 38 crore. Since then, Punjab has kept the valuation static at Rs 38 crore.
Principal Secretary (civil aviation) Viswajeet Khanna said, “We get the parts of chopper that need to be replaced at current prices. Due to this, the cost and value of helicopter increases and there is no depreciation.”
In 2013, ICICI Lombard insured the chopper for a premium of Rs 24.15 lakh for a valuation of Rs 38 crore. The company was also asked to quote the premium for a depreciated value of Rs 35 crore, which came to Rs 22.49 lakh.
However, the Punjab government went with the higher valuation, citing ICICI Lombard’s advice “there are no guidelines of Insurance Regulatory and Development Authority on depreciation of aircraft/helicopter. It is always at the agreed value of the aircraft/helicopter on which insurance is issued.”
The department also put on record that various airline service companies and governments of Delhi, Jammu and Kashmir and Chhattisgarh were consulted who said there is no depreciation on helicopter value. The third insurance company which had submitted bid in 2013 was National Insurance Company (Rs 52 lakh premium amount).
“For the first five to seven years, there is no depreciation of helicopter and the insurance is done on agreed value. Due to this, there has been no depreciation in the value,” said Abhay Chandra, advisor Civil Aviation department Punjab.