Budget says aviation PSUs must find another Rs 12,000 crore this year

The government has increased the target of internal and extra budgetary resources (money from loans or through reinvestment of profits) which will be raised by public sector undertakings under the Ministry of Civil Aviation by over 63.5 per cent, from Rs 7,320 crore in the revised estimates of 2008-09 to Rs 11,974.8 crore in 2009-10.

The money will be used mostly to fund the aircraft acquisition programme of the financially ailing National Aviation Company of India Ltd (Nacil), which runs the Air India brand, and also the Airports Authority of India (AAI) which is undertaking the expansion of airports in Kolkata and Chennai, among others.

As a result, the outlay of the ministry has gone up substantially from Rs 7,490.6 crore in the revised estimates of 2008-9 to Rs 12,164.8 crore in 2009-10, a jump of over 62 per cent.

The government, in its Budget documents, says the plan allocation of the ministry has been raised to meet the expenditure due to enhanced competitiveness of Indian carriers for international operations, cost of a media campaign and for capacity-building to enhance effective management and control in aviation.

Nacil is making an investment of over Rs 40,000 crore to buy over 118 aircraft and is in dire need of loans to fund its acquisition of new planes.

The Air India management has been looking for a bailout package to get the corporation out of the woods, which includes a combination of expanding its equity capital base (Rs 140 crore) and also to raise loans from the market.

In the Budget documents, the IEBR target sanctioned for Nacil has nearly doubled from Rs 4,136.9 crore in 2008-09 to Rs 8,165.6 crore in 2009-10. The documents say Nacil will seek external commercial borrowing or suppliers credit of Rs 7,530 crore this year, up from Rs 3,708 crore last year.

The airline had proposed to borrow/suppliers credit of about Rs 8,300 crore last year but managed to borrow less than half, at Rs 3,708 crore. It has already acquired 48 aircraft and is expected to take delivery of around 30 more this year, for which payment has to be made.

However, the government has made no allocation for any budgetary support for the airline, which means there is no provision for infusion of fresh equity in AI.

The IEBR for AAI has also been increased substantially by over 22.5 per cent, from Rs 2,567.2 crore in the revised estimates of 2008-09 to Rs 3,145.8 crore in 2009-10. The money will be used to fund AAI’s ambitious airport expansion projects in Kolkata with an investment of Rs 1,942 crore and in Chennai with an investment of Rs 1,808 crore.

The government had decided — due to opposition from the Left — not to privatise the two airports as they had done in Delhi and Mumbai.