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Govt to infuse additional equity in Air India

Govt to infuse additional equity in Air India
PTI
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First Published: Sat, Aug 29 2009. 07 21 PM IST
Updated: Sat, Aug 29 2009. 07 21 PM IST
New Delhi: The government is understood to have decided to infuse additional equity in Air India and give a soft loan to counter the financial crunch, as a high-level committee on Saturday asked the civil aviation ministry to move a note on the issue for consideration of the Union cabinet.
The Committee of Secretaries (CoS), headed by cabinet secretary K M Chandrasekhar, which reviewed the turnaround plan of the ailing carrier, directed the ministry to prepare the cabinet note on the matter.
The note, to be prepared in consultation with the finance ministry, would be ready for circulation to the cabinet ministers in the next 7 to 10 days, official sources said after the meeting here.
Though there was no official confirmation of the quantum of equity infusion and the soft loan the government could give to the national carrier, there were indications that its equity base, which now stands at only Rs145 crore, would be enhanced by at least Rs2,500 crore.
While the government would make only a partial contribution as equity infusion to the airline, a major part of resource mobilisation is likely to be through issuance of Initial Public Offer or infrastructure bonds, they said, adding the cabinet would now take a final call on the issue.
At the first meeting of the CoS last month, Air India had sought an equity infusion of about Rs2,500-3,000 crore and a loan of Rs10,000 crore at 5-7% interest for repayment over five years.
The carrier’s losses had gone up to about Rs7,200 crore in 2008-2009, while it has a debt of Rs16,000 crore. It has started negotiating with banks and financial institutions to turn its high-cost debt of Rs10,000-11,000 crore into low- interest loans.
However, the banks wanted the national carrier to get a comfort letter or a sovereign guarantee to convert these high-cost debt, which the government has agreed upon, sources said.
At the meeting, the finance ministry made projections on the quantum of equity infusion and the soft loan which could be given to the ailing carrier by the government.
The government has also asked the petroleum ministry to extend the credit limit on the purchase of jet fuel by Air India for at least three more months, they said.
Air India CMD Arvind Jadhav made a presentation on the turnaround plan spread over 36 months as well as the steps taken in the past two months to reduce costs, enhance revenue and transform business practices.
The CoS maintained the airline company now needed to “examine its strategic position with respect to its shareholders’ (government) objectives”.
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First Published: Sat, Aug 29 2009. 07 21 PM IST
More Topics: Air India | Nacil | Bailout | Cost-cutting | CoS |