House panel asks govt to release Air India funds

Jaitley in the Union Budget allotted Rs 1,800 crore against Air India's demand of Rs 2,587 crore

The Parliamentary Standing Committee on Transport has said the finance ministry not agreeing to infuse the equity amount that Air India had sought will affect the performance of the airline. 

Finance Minister Arun Jaitley in the Union Budget for FY18 allotted Rs 1,800 crore against Air India’s demand of Rs 2,587 crore. 

As part of a turnaround plan approved by the former United Progressive Alliance government in 2012, the Centre had agreed to infuse Rs 30,231 crore in the airline till 2020-21.

The committee headed by Trinamool Congress M P Mukul Roy said the shortfall of Rs 787 crore could force the airline to borrow from banks at a higher interest rate.

“A shortfall when the company is at a critical position in achieving targets under a turnaround plan should be avoided. The committee recommends that the full amount of equity infusion be restored to Air India,” the panel’s report said.

Air India is seeking to raise Rs 10,000 crore from Life Insurance Corporation (LIC) at a low interest rate. The move is stuck because the finance ministry has not agreed to extend a sovereign guarantee for the loan, which LIC is insisting upon. 

Air India Chairman Ashwani Lohani has written to banks asking it link the interest rate to the MCLR, which is lower than the base rate of a bank.

The Comptroller and Auditor General in a recent report noted that short-term loans had dented the Air India’s revival prospects and this might result in a another financial restructuring of the airline. 

Backed by low fuel costs, Air India registered an operating profit of Rs 105 crore in FY16, the first time in a decade. But it posted a loss of Rs 2,636 crore during the year because of a high interest outgo. 
 

On September 30, 2016, Air India owed banks Rs 23,298 crore. The airline pays around Rs 4,000 crore as interest every year. 

The airline’s plan of restructuring through a debt-equity swap failed because of banks’ unwillingness to take up its equity.

Lohani has written to the civil aviation ministry highlighting the perils of reduced equity infusion. He pointed out as the airline was expanding, it would be forced to raise temporary loans. 

Following this, the Centre allotted an additional Rs 830 crore to Air India in supplementary demands. The parliamentary committee recommended that in future the amount committed under the turnaround plan be allotted to Air India at the budgetary stage itself.