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The Min­istry of Fi­nance has turned down

300-bil­lion fund-in­fu­sion pro­posal for the na­tional car­rier Air In­dia in the ab­sence of a clear turn­around plan. The Min­istry of Civil Avi­a­tion had sought the pack­age to wipe out the debt obli­ga­tion of the state-owned air­line, de­fault­ing on salary dis­burse­ments and pay­ments to ven­dors. The Min­istry of Fi­nance has in­stead asked the air­line to trans­fer its non-core as­sets and sub­sidiaries to a spe­cial pur­pose ve­hi­cle (SPV). Those as­sets would be mon­e­tised to re­duce the com­pany’s un­sus­tain­able por­tion of the debt. Of the 500 bil­lion to­tal debt, around

220 bil­lion has been termed un­sus­tain­able, im­ply­ing it can­not be ser­viced with the cash flow in­come.

Of the over­all debt, air­craft loans ac­count for about 160 bil­lion, which has been raised par­tially from EXIM Bank, for­eign in­sti­tu­tions and non-con­vert­ible deben­tures, while the rest is from work­ing cap­i­tal. The Min­istry of Civil Avi­a­tion is of the view that the air­line can­not per­form at the op­ti­mum level due to the hefty in­ter­est outgo and is of the view that small in­fu­sion of funds will not help the air­line’s turn­around plan as it was pay­ing 40-50 bil­lion an­nu­ally as in­ter­est. The stand of the Min­istry of Fi­nance also stems from the fact that in an elec­tion year, bud­getary re­sources need to be al­lo­cated for fund­ing agri­cul­ture and in­fra­struc­ture rather than for an air­line. The govern­ment is si­mul­ta­ne­ously pre­par­ing to sell Air In­dia’s en­gi­neer­ing and ground-han­dling sub­sidiaries, Air In­dia En­gi­neer­ing Ser­vices Lim­ited (AIESL) and Air In­dia Air Trans­port Ser­vice Lim­ited (AIATSL).

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