Par panel for full restoration of equity infusion to AI

Recommending restoration of full amount of equity infusion of Rs 3,901.49 crore in Air India for this fiscal as sought by it, a parliamentary panel today said a shortfall in funding could adversely impact the national carrier's financial and operational performance.
The government, as part of its Rs 30,231-crore bailout package under Air India's Turn Around Plan(TAP) or Financial Restructuring Plan (FRP), has allocated Rs 1,713 crore to the airline against a request for Rs 3,901.49 crore this fiscal.
However, as per the TAP (or FRP), the amount of equity infusion for Air India for the current fiscal was slated at Rs 3,016 crore.

"As against this amount, Air India had requested for an equity infusion of Rs 3,901.49 crores. The difference is primarily on account of the carry forward of the shortfall in equity infusion up to FY16 amounting to Rs 977 crores," the department-related Parliamentary Standing Committee on Transport, Tourism and Culture, headed by TMC MP K D Singh, said in its report tabled in Parliament today.
The government had infused Rs 3,300 crores in Air India last fiscal against its demand for Rs 4,277 crores, including compensation sought for the impact of exchange rate variation, interest paid, among others.
"The committee finds that the fund allocation committed for 2016-17 as per TAP has not been provided for Air India," it said.

Stating that there was a deficit of Rs 977 crore in equity infusion in the carrier last fiscal also, the report added "the committee feels that this reduction in equity infusion might adversely affect the financial and operational performance of the company since it may be forced to take loans from banks and financial institutions at a higher interest rate to meet the short fall, which was not contemplated under the Financial Restructuring Plan."

"The committee, therefore, is of the considered view that such shortfall, at this stage when the company is presently placed at a critical position in achieving the TAP targets, should be avoided," the report stated.

Since the committed financial support from the government is vital to sustain the momentum of performance of Air India, the committee strongly recommends that the full amount of equity infusion should be restored to Air India, it said.
The panel, in its report, also recommended that the issue of restoration of full equity infusion amount may be taken up with the Finance Ministry.