Oil firms threaten to cut fuel supply to AI
FIRMS ACCUSE AIRLINE OF NOT HONOURING ITS COMMITMENT TO PAY ₹100 CR EVERY MONTH TO CLEAR ATF DUES
NEW DELHI: State-owned oil companies on Tuesday accused Air India of not honouring its commitment to pay ₹100 crore every month to clear overdue aviation turbine fuel (ATF) outstanding of over ₹5,000 crore and will be forced to snap supplies at major airports from Friday if no solution is offered.
“Air India had back in June and again in September agreed to pay the three oil marketing companies (OMCs) ₹100 crore every month to clear past ATF dues. But unfortunately it hasn’t met its commitment,” said Sandeep Kumar Gupta, director (finance), Indian Oil Corp. (IOC).
IOC and two other OMCs, Bharat Petroleum Corp. Ltd (BPCL) and Hindustan Petroleum Corp. Ltd (HPCL), have served a notice on Air India that they will be forced to stop jet fuel supplies if payments are not made, he said.
“We have said we will stop supplies at major airports. Let’s see what is the outcome of negotiations before the October 18 deadline,” Gupta said.
Air India owes IOC about ₹2,700 crore in unpaid fuel bills. This includes ₹450 crore of interest. It’s outstanding towards the three oil firms is about ₹5,000 crore including interest.
Gupta said the oil companies haven’t indicated the airports where supplies will be stopped but they will be major airports, unlike the six small airports where fuel supplies to Air India aircraft were stopped in August.
Supplies were resumed last month after Air India committed to paying ₹100 crore every month to oil firms to clear past dues, he said, adding Air India buys about ₹13-14 crore worth of fuel every day from IOC.
August 22, IOC, BPCL and HPCL had stopped fuel supplies to Air India at six airports— Kochi, Mohali, Pune, Patna, Ranchi and Visakhapatnam over payment defaults.
However, after the intervention of the ministry of civil aviation, they resumed fuel supply on September 7.
Meanwhile, Air India Assets Holding Ltd (AIAHL), a special purpose vehicle (SPV) created by the government to park about half of the airline’s debt, plans to raise about ₹8,064 crore through a government-guaranteed bond issue this week, said a senior airline official.
Proceeds of the issue will be used to repay a portion of the airline’s debt, said the official, who asked not to be named.
The official said the bond issue and subsequent transfer of debt to the SPV would reduce Air India’s monthly interest expenses by about ₹2,600 crore from November 1.
“Air India’s monthly interest outgo will come down to about ₹1,400 crore from 1 November 2019. This will give the airline more fiscal room to clear its existing dues,” said the official cited above.