Govt asks HPCL to invoke UB guarantee to recover dues

Concerned at Kingfisher Airline’s (KFA’s) rising unpaid jet fuel bills, the government has asked Hindustan Petroleum Corporation Ltd (HPCL) to invoke the corporate guarantee given by Vijay Mallya’s United Breweries (UB) Group to recover dues and supply ATF in future only against a bank guarantee.

The oil ministry on March 17 wrote a letter to the HPCL chairman to convene a “special board meeting” to consider, among other things, invoking UB Group’s Rs 250-crore corporate guarantee to recover part of the Rs 602.05-crore outstanding dues.

“The government has noted with concern the continued outstandings of KFA with HPCL on account of ATF supplies,” it said. “The outstanding were reported to be Rs 602.05 crore on March 4, 2010, with a security in the form of a Rs 250 crore corporate guarantee from United Breweries and Holding Ltd.”

The ministry asked HPCL to place KFA on cash-and-carry terms as is done by other state-run firms Indian Oil Corp and Bharat Petroleum since early 2009.

The HPCL board is likely to meet on March 30 to also consider the ministry’s suggestion of making future supplies “against bank guarantee to cover the entire outstanding dues including for credit period allowed by HPCL”.