Mumbai/New Delhi: Public sector oil marketing companies (OMCs) like Indian Oil Corp, Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL), which together have unpaid liabilities of close to 5,000 crore from Air India Ltd., will receive 100 crore from the national carrier in September, two people with direct knowledge of the matter told Mint adding that this payment is one of the arrangements chalked out by the government to ensure uninterrupted fuel supply to the debt-ridden airline.

OMCs have, however, put the airline on a cash and carry mode, which means that the carrier will have to make immediate payment for fuel purchase.

“Air India will be making daily payments for the current supplies that are being provided to them by OMCs, a step which will prevent the airline’s outstanding (towards OMCs) from shooting up further," said one of the above mentioned people, who requested anonymity.

“To settle the old outstanding, Air India will pay a lump sum of 100 crores every month to the OMCs," the person added.

Public sector OMCs had earlier on 22 August afternoon stopped fuel supplies to Air India at six airports of Kochi, Mohali, Pune, Patna, Ranchi and Vizag over payment defaults. According to the three fuel retailers, Air India owed 5,000 crore in unpaid fuel bills with payments being delayed by almost eight months.

The overdue amount included the interest accrued on outstanding dues.

However, the OMCs have resumed jet fuel supplies to Air India from 7 September after the government stepped in to mediate talks between the debt-ridden airline and the oil companies.

"We don't know how Air India plans to finance the repayment. At a meeting last week, top Air India officials assured us that outstanding dues will be repaid in a monthly installment," said the person mentioned above adding that it could possible take months for the national carrier to clear its dues.

“Though this is an ad hoc arrangement, if the government takes steps to pump in funds in Air India, then the situation may change," the person added.

Air India has a 90-day credit period, which means the aviation turbine fuel (ATF) it buys on a given day can be paid anytime in the next three months.

However, since Air India had not been making regular payments and with the credit period shooting up to 230 days, oil firms are cautious about further extending the national carrier’s credit line in future.

"It is difficult to say what will happen in future. OMCs as well as Air India are both government-owned companies which have a public duty to fulfill," said the second person.

“We are going by Air India's word that it will pay us 100 crore every month," the second person added.

At present, on a daily basis, Air India buys about 20-22 crore worth of products from the OMCs, while a fraction of the national carrier’s fuel is supplied by private players.

“Air India is committed to pay off its dues towards receivables from OMCs," said a senior Air India official, who requested anonymity.