Air India currently has a debt of over  ₹55,000 crore (Mint file)
Air India currently has a debt of over 55,000 crore (Mint file)

OMCs not to extend Air India's fuel restriction to other airports

  • Air India owes around 5,000 crore to public sector OMCs, including IOCL, BPCL and HPCL
  • OMCs had earlier suspended fuel supplies to the national carrier at six tier two airports — Cochin, Pune, Patna, Ranchi, Mohali, and Visakhapatnam — due to non payment of dues

New Delhi: Public sector oil marketing companies — Indian Oil Corp (IOCL), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) — that have restricted aviation fuel supply to Air India Ltd at six domestic tier two airports due to non payment of dues to the tune of 5,000 crore by the national carrier, will not extend this to other airports, two officials with OMCs told Mint.

"Our idea is not to cause inconvenience but claim our dues that run very high at the moment. Air India had been buying time for the past six months on some pretext or the other such as elections, parliament sessions etc. But we are not in a position to give any more extension now," said one of the officials mentioned above, who's an official with one of the above mentioned OMCs.

Public sector oil marketing companies had earlier suspended fuel supplies to the national carrier at six tier two airports — Cochin, Pune, Patna, Ranchi, Mohali, and Visakhapatnam — due to non payment of dues from 22 August.

The second official said OMCs would wait until Monday (26 August) to see if Air India comes back to them with a resolution plan to clear the dues.

"The joint decision to stop fuel supply to Air India from six airports, i.e., Kochi, Mohali, Pune, Ranchi, Patna and Visakhapatnam, was taken by OMCs in the wake of long overdue payments to the tune of 5,000 crore. This includes the interest accrued on the outstanding dues," IOCL said in a statement on Friday.

Meanwhile, Air India may find it difficult to pay off its entire dues since the airline is currently facing a cash crunch.

An Air India official told Mint under the condition of anonymity that the airline was not in a position to pay off its entire dues to OMCs and had earlier offered OMCs about 60 crore to clear a part of its dues.

"We are sure that the government will intervene since we can't have a situation where the national carrier will have to ground its planes due to restriction in fuel supply," the Air India official said, requesting anonymity.

Air India has often delayed payment of dues to OMCs in the past. Oil companies have also temporarily stopped fuel supply to the national carrier, but resumed services after the airline paid back part of its dues.

"Because we are both government companies, we would not be surprised if there is government intervention in this matter. However, it is important that we recover our dues since we are listed companies," said the second OMC official mentioned above, on the condition of anonymity.

Air India currently has a debt of over 55,000 crore. The government had, in February 2019, approved the creation of a special purpose vehicle (SPV), Air India Asset Holding Ltd (AIAHL), to house 29,464-crore debt of the airline as well as its non-core assets, painting and artefacts and other non-operational assets.

With massive outlay of cash on debt servicing, the national carrier often finds itself in short-term cash crunch, which has in the past led it to delay payment to vendors.

The cash-strapped national carrier's plans to raise funds to the tune of 7,000 crore from a bond sale earlier this year did not materialise.

The government is hoping to privatise the national carrier in the coming months. The Centre had, in June 2019, announced that its plans to sell the debt-laden state-run carrier were still on track for 2019-2020, after it failed in its attempt to sell a 76% stake in the airline during 2018-19 due to a lack of interest from bidders.

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