PSU OMCs stop supply to Air India as it fails to pay dues

PSU Oil Marketing Companies - Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) - have been constrained to suspend supply of jet fuel to Air India and Alliance Air flights at six airports from the evening of August 22 due to mounting outstanding dues from the airline and their ramifications for their working capital requirements.

The joint decision to stop fuel supply to Air India from six airports, i.e., Kochi, Mohali, Pune, Ranchi, Patna, and Visakhapatnam, was taken by the OMCs in the wake of long-overdue payments to the tune of Rs 5,000 crore. This includes the interest accrued on the outstanding dues, a press release issued by OMCs said.

Based on a letter dated August 14, the Air India management was intimated by the PSU OMCs regarding their decision to stop fuel supplies at the aforementioned airports with effect from August 22. Air India uplifts about 250 kilolitres (kl) of Aviation Turbine Fuel (ATF) at the above six airports on a daily basis.

The three PSUs had served similar notices to Air India earlier but withdrew them subsequently and continued with ATF supplies on the assurance of Air India management that the outstanding dues will be cleared at the earliest. However, despite repeated follow-up and reminders for payment by the OMCs, no major reduction in the outstandings materialised from the airline till date, even after the ATF prices have climbed down from a high of Rs 76,378 per kilolitre (kl) in November 2018 to Rs 63,295 per kl currently.

As per the commercial terms agreed upon, Air India enjoys a credit period of 90 days. However, the credit period has since crossed the limit and has been at about 230 days for the past nearly two years. Despite this, the OMCs have been supportive of Air India throughout this period.