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| Patel informs Cabinet of Air India's need for equity infusion |
| Press Trust of India / New Delhi Aug 13, 2009, 17:00 IST |
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The need for equity infusion in cash-strapped Air India and converting its high interest debt to low-cost came up for discussion at a meeting of the Union Cabinet here today.
Civil Aviation Minister Praful Patel briefed the meeting on the two issues relating to Air India and the requirement of the Airports Authority of India (AAI) to raise Rs 5,000 crore through infrastructure bonds to fund the modernisation and upgradation of a large number of airports.
Prime Minister Manmohan Singh, who chaired the Cabinet meeting today, has already lent his support to help Air India emerge out of its losses when Patel briefed him last week. The total losses in 2008-09 are estimated around Rs 4,000 crore, up from Rs 2,226 crore in the previous year.
Patel told reporters here after the meeting that the Cabinet was apprised of the need to infuse equity into the airline. Additional capital was needed as Air India currently has an equity base of only Rs 145 crore and has ordered 111 planes worth over Rs 50,000 crore.
The government is understood to be considering an equity infusion of Rs 9,500 crore, but the amount has not yet been officially confirmed.
The Cabinet was also informed about the need for converting the high-cost debt of the airline into low-cost by reducing the rates of interest, Patel said.
Besides the government, Air India, which has a total debt of Rs 16,000 crore, is negotiating with banks to reduce interest on its high-cost debt that is estimated at Rs 10,000-11,000 crore.
However, the banks want the national carrier to get a comfort letter or a sovereign guarantee from the government to convert the high-cost debt into low-interest loans.
The issues relating to Air India are being considered by a Committee of Secretaries headed by Cabinet Secretary K M Chandrasekhar. The committee is meeting next on August 29.
Several global carriers like British Airways, Japan Airlines and China Southern have received financial support from their respective governments but Air India has not.
The erstwhile Air India and Indian Airlines have together so far contributed over Rs 4,500 crore by way of dividend, tax and duties.
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