Indian Government asked Oil Companies to Defer air India’s Deadline to Clear Dues

The Indian government on 26 March 2011 asked oil companies to defer the deadline given to Air India to clear dues by a month. The decision to ask the oil companies to defer the March 29 deadline by another month was taken at a meeting of a Committee of Secretaries, chaired by Cabinet Secretary K M Chandrasekhar. Oil companies had threatened to stop jet fuel supplies to the national carrier from 29 March 2011 as the carrier did not clear dues worth Rs 2400 crore. Failing to clear the dues Air India sought discount on payments on the lines the oil marketing firms give to private players which are on a cash-and-carry mode.

While Air India has been paying a whopping sum of Rs 13.5 crore a day for all its aircraft to fill jet fuel.The oil companies on the other hand were seeking a hike of Rs five crore per day due to the rising crude prices. The oil marketing companies could pay up to Rs 4800 per kilolitre of aviation turbine fuel to Air India on account of the amount it has been paying on a daily basis, since the cash-and-carry system was imposed on it from 7 December 2010.

The payment of dues of about Rs 450 crore by the government to the ailing national carrier was also discussed in the meeting. Rs 344 crore is owed to Air India by the Prime Minister’s Office and the Ministries of Defence and External Affairs. Air India is also likely to get Rs 106 crore from the government on account of relief and evacuation flights like those recently mounted to Libya
Air India is burdened with a debt of Rs 40,000. It has incurred a cumulative loss of over Rs 13326.86 crore since its merger with Indian Airlines in 2007 at the close of financial year 2009-2010. Before merger, the losses reported by erstwhile Air India and Indian Airlines were Rs 447.93 crore and Rs 240.29 crore respectively.

The Indian government made a provision of Rs 1200 crore to the airline as additional equity infusion.

This is the third tranche of equity for Air India, which has received Rs 800 crore and Rs 1,200 crore respectively in the 2009-10 and 2010-11 budgets.