'Cabinet nod for Rs 800 cr infusion in AI next week'

The government is likely to approve an additional equity infusion of Rs 800 crore into the cash-strapped Air India next week, but wants the airline to take 'extraordinary' measures for financial turnaround.

"We are moving the Cabinet (for equity infusion of Rs 800 crore), a note has already been circulated, I think by next week the Cabinet approval should come," Civil Aviation Minister Praful Patel said after a meeting of the Group of Ministers formed on the revival of Air India.

"These are testing times for the aviation industry both internationally and domestically and extraordinary measures need to be taken," he added.

Patel said that the target of reducing cost by Rs 2,000 crore by the national flag carrier until March is unlikely to be met. "The target of reducing cost by Rs 2,000 crore by March is unlikely to be met....So far costs have been cut by Rs 700-800 crore."

A further assistance would only be given on achievement of specific revenue enhancement and cost reduction targets by the airline, Patel said.

The decision on additional grant would also be taken keeping in view the high cost debt "both current and long term" taken by Air India.

The government had earlier decided to grant the ailing airline Rs 800 crore this fiscal as equity.

When asked about demerging the National Aviation Company of India Ltd (NACIL), the entity formed after the merger of Air India and Indian Airlines, Patel said, "the issue is not about merger or demeger, the issue is how can we make the entire airline's operations profitable and that is the issue before the Group of Ministers."

The NACIL has been incurring losses since its inception with Rs 2,226 crore loss in 2007-08 and about Rs 5,500 crore loss in 2008-09.