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Maharajah in debt! Oil companies threaten to stop Air India's fuel supply unless dues are cleared

Air India is just about managing to stay afloat on the Rs 30,000 crore bailout package extended by the previous UPA regime in 2012 for a decade.

twitter-logo BusinessToday.In   New Delhi     Last Updated: September 26, 2018  | 12:46 IST
Maharajah in debt! Oil companies threaten to stop Air India's fuel supply unless dues are cleared

The beleaguered Maharajah, reeling under a debt burden of over Rs 48,000 crore and scrambling for cash infusions since the failed disinvestment attempt, has just landed in a fresh mess. According to The Economic Times, Air India, which guzzles fuel worth around Rs 20 crore daily, has been issued an ultimatum by the oil marketing companies (OMCs)-unless the national carrier clears its fuel bill on a daily basis, the companies are threatening to withhold supply.

"Air India has not been regular with payments due to its financial problems," a senior aviation ministry official told the daily, adding that the airline and OMCs are now negotiating. This development follows Air India's attempts to reduce its overall debt burden. The carrier recently used the cash infusions from the government to clear its outstanding dues to foreign and Indian lenders, as well as other vendors.

However, it left out oil companies to whom it owes more than Rs 5,000 crore, including interest. Furthermore, the airline has reportedly not been making its daily fuel payment in full for the past one-and-a-half years. "Air India is a PSU and that's why we are continuing to supply. Had it been a private firm, we could have already stopped the supply," a senior executive at a state-run oil company told the daily. "But Air India must realise that we can't go beyond a point. They have difficulty in paying, but we too have to keep our recoverable in check. We want them to provide us with a firmer plan on how the money is going to come back to us."

Meanwhile, Air India is just about managing to stay afloat on the Rs 30,000 crore bailout package extended by the previous UPA regime in 2012 for a decade. Of that, the airline has already received Rs 29,730 crore.

Earlier this month, the government had infused Rs 980 crore as equity in Air India after it reportedly exhausted the Rs 1,500 crore loan taken from Bank of Baroda in late August, for which the government stood as the guarantor.

But the Maharajah perhaps has one last trump card left to play. Given that the government has granted the airline sovereign guarantee to raise Rs 2,000 crore from banks, it can still raise Rs 500 crore more. Citing a senior Air India official the report added that the carrier can raise this additional amount and pay a part of it to the oil companies.

The buzz is that the government also plans to initiate the strategic sale process for at least four Air India subsidiaries soon, including Airline Allied Services Ltd and Hotel Corporation of India. In additions, plans to sell its Delhi headquarters are on the anvil, along with various other land assets/buildings across the country. The big question is whether these efforts will be enough to keep the national carrier going.

With PTI inputs

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