SP's Airbuz



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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