Oil companies defer snapping fuel supplies to Air India

State-owned oil companies on Friday decided to defer snapping fuel supplies to Air India after the national carrier promised to adhere to the schedule of clearing past outstanding dues, officials said.

Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) had on October 5 written to Air India that they will stop supplying aviation turbine fuel (ATF) to its aircraft at six major airports from October 18 if it didn't honour its payment commitments.

"It (Air India) has made a request not to stop supplies and promised to make regular payments. In view of their commitment, we have decided to defer the decision to terminate supplies," an official at one of the fuel retailers said.

Air India owes the three firms over Rs 5,000 crore in past fuel bills and had first in June and again in September agreed to pay this amount in monthly installments of Rs 100 crore. But Air India failed to honour its commitment, leading to the October 5 notice.

IOC Director (Finance) Sandeep Kumar Gupta had earlier this week stated that the Rs 100 crore monthly payment was beside the airline being put on cash-and-carry where it was given fuel only against cash payment.

Air India owes IOC about Rs 2,700 crore in unpaid fuel bills. This includes Rs 450 crore of interest. It's outstanding towards the three oil firms is about Rs 5,000 crore including interest.

Air India buys about Rs 25-26 crore worth of fuel every day from the three oil companies.

On August 22, IOC, BPCL and HPCL had stopped fuel supplies to Air India at six airports of Kochi, Mohali, Pune, Patna, Ranchi and Vizag over payment defaults. The supplies were resumed on September 7 after the intervention of the Ministry of Civil Aviation.

On October 5, the oil companies had told Air India that if it did not make the monthly lump sum payment, they will stop fuel supply from October 11 at "six major domestic airports". Subsequently, Air India wrote to them requesting not to stop the fuel supply.