Budget 2012: Air India may get Rs 10,000 cr package
Mail Today Bureau February 27, 2012Cash-strapped national carrier Air India may get a Rs 10,000 crore support package, including Rs 6,600 crore worth of equity infusion, in the forthcoming Budget scheduled for mid-March.
The Union Cabinet is expected to consider this package shortly to enable inclusion of the provision in the general budget, for which a cabinet note has already been issued for comments to the ministries concerned.
The government has invested Rs 1,200 crore this year, taking Air India's equity base to Rs 3,345 crore. The infusion of funds would come in time for the carrier to induct the much-delayed Boeing 787 Dreamliner aircraft, the first of which is likely to join the fleet in April.
The move comes two weeks after a Group of Ministers (GoM), headed by finance minister Pranab Mukherjee, cleared the financial restructuring plan for Air India, allowing it to raise Rs 7,400 crore by issuing government-guaranteed bonds or by other means.
The bond is likely to carry a coupon rate of 8.5-9 per cent. Financial institutions who have lent money to Air India may subscribe to these bonds, civil aviation ministry officials said. The entire package was suggested by the GoM as part of the airline's financial restructuring and turnaround plan.
Official figures show that the debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore is long-term loan on fleet acquisition and Rs 4,600 crore is vendor dues. It has an accumulated loss of Rs 20,320 crore. Banks and financial institutions had proposed several measures to beef up Air India's net worth and these were among the proposals approved by the GoM, sources said.
Air India's debt restructuring plan had hit a hurdle after the banks refused to convert a part of the short-term debt into equity.
According to the earlier plan, the banks were to restructure a debt of Rs 18,000 crore, of which about Rs 10,500 crore would have to be converted into long-term with a repayment period of 10-15 years and the rest was to be converted into equity. The banks had raised objections to it. This had prompted the GoM to permit Air India to raise resources through bonds or non-convertible debentures, the sources said.
Courtesy: Mail Today