Govt to advance Air India equity infusion plan

Govt to advance Air India equity infusion plan

New Delhi/Mumbai: The government wants to advance its plan to infuse equity into the national carrier Air India to next month, ahead of Parliament’s winter session, which is expected to begin in the first half of November. The process, part of a government rescue programme, was earlier scheduled to have taken place later this year or in early 2010.

Cash-strapped National Aviation Co. of India Ltd, or Nacil, which runs the state-owned airline, may get the money earlier because of pressure from lawmakers, according to a member of the parliamentary standing committee on transport, tourism and culture, on condition of anonymity.

The national carrier, saddled with cumulative losses of Rs7,226 crore in the 2008 and 2009 fiscal years and awaiting a government bailout, was supposed to receive its first tranche of Rs2,000 crore out of a total Rs5,000 crore by late December or early January. Its current equity capital is a mere Rs145 crore. The cabinet committee on parliamentary affairs is meeting on Wednesday to decide the winter session’s dates. The government is also considering giving Nacil a sovereign guarantee to restructure Rs16,000 crore of working capital loans to help it save at least Rs500 crore.

Air India’s borrowings shot up to Rs15,241 crore at the end of June, up from Rs6,550 crore in November 2007 and the airline had asked the government for a loan and equity infusion of around Rs15,000 crore.

In a 25 July meeting, the committee of secretaries had suggested Nacil prepare a cost-reduction proposal, to justify an equity infusion or any soft loan grant.

A secretary-level meeting was held on Tuesday to discuss the revival plan and this will be followed by a group of ministers meeting on Wednesday.

The government indicated to the standing committee that it would soon take a final decision on Air India’s demand for equity infusion. The lawmaker cited earlier said the panel pressured the government to expedite the equity infusion and restructuring of Air India at its meeting on Tuesday.

Panel members asked the government to hold people responsible for the mess in Air India accountable. Civil aviation secretary Madhavan Nambiar and Air India chairman and managing director Arvind Jadhav were also present at the meeting.

“We pointed out that only 18% of the cost component is accounted for by the wage bill, 8% is debt servicing and 36% is under others heads that include leasing of aircraft, ground handling and passenger amenities etc. (with the rest for aviation fuel)," said the committee member. “How can you hold only one section accountable for the losses?"

The parliamentary panel also took exception to Air India’s decision to cancel many flights, allowing other carriers to benefit, the member said.

“They themselves admit that Air India has lost at least 10 lakh passengers in the past because it had cancelled many important flights and those had been taken by private parties," he said. “The government said it would look into the issues raised by the panel."

Meanwhile, Air India is headed for a loss of about Rs5,000 crore for the fiscal year ending March.

“For Air India, Rs2,000 crore or even Rs5,000 crore is insufficient to tide over the current crisis. But certainly it will help the company to force nationalized and private banks to lend at much lower rates," said an airline consultant, who did not want to be identified.