Hyderabad: Cash-strapped Air India has received only Rs325 crore in the first tranche of equity infusion from the government, Rs75 crore short of the approved sum.

Short of cash: Nacil chairman and MD Arvind Jadhav. Harikrishna Katragadda / Mint

In a letter to the national airline on 27 February, the ministry of civil aviation stated that it was giving Rs75 crore of the promised amount to the Airports Authority of India (AAI), said two senior officials in the ministry of civil aviation, asking not to be identified.

Air India, run by state-owned National Aviation Co. of India Ltd (Nacil), may see a similar cut in the next tranche of equity infusion of Rs400 crore that’s due later in March, one of the officials said.

On 18 February, the Cabinet Committee on Economic Affairs had approved the release of Rs800 crore as equity infusion into Nacil in two equal portions to ease the airline’s cash flow crunch and help it borrow at lower rates.

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Air India, which had a loss of Rs5,548 crore in 2008-09, is seeking a Rs5,000 crore equity infusion from the government.

Air India’s current equity is Rs145 crore. The 2010-11 Budget has made a provision of another Rs1,200 crore for the airline.

Nacil chairman and managing director Arvind Jadhav confirmed Air India had received only Rs325 crore and the remaining was given to AAI.

“I cannot answer why. You will have to ask the ministry of civil aviation," Jadhav told Mint on the sidelines of India Aviation 2010, the second international exhibition and conference on civil aviation, organized by the civil aviation ministry and the Federation of Indian Chambers of Commerce and Industry.

“Since Air India owes some Rs700 crore (to) AAI in terms of dues, there is nothing wrong in allocating Rs75 crore to AAI," said the same ministry official quote earlier. “AAI is also in financial distress."

A senior Air India official, on condition of anonymity, said Air India was “in the process of clearing AAI dues and it has already started making payments".

“The equity base of Air India (is) already low," he added.

The official said according to Air India’s accounts, the airline has to pay AAI Rs320 crore in balance dues and not Rs700 crore as claimed by the authority. Air India has been paying AAI Rs5 crore every month for the past year as part of a settlement mechanism, he added.

A senior AAI official declined to comment on the dispute over the dues.

In November, a group of ministers that deals with Air India issues decided to infuse capital into the flag carrier, but tagged this to cost-cutting measures by the airline.

On Wednesday, civil aviation minister Praful Patel said Air India is “planning to return 22 leased aircraft starting this month".

Air India has decided to cut its fleet size to 105 by March 2011 from 146 now, the civil aviation ministry had said in a statement on 18 February.

A senior airline consultant, who did not want to be identified, said the government’s equity infusion would not help Air India tackle its long-term issues. “These are short-term relief," he said. “With Air India generating a whopping Rs400 crore cash deficit a month, it will have to find hard-hitting cost-cutting measures, including wage cut(s) and downsizing."