Air-India Seeks Rs 2,000crore Revival Package
Air-India is seeking a revival package of around Rs 2,000 crore from the government as part of the Kelkar Committee recommendations.
The carrier requires around Rs 1,000 crore to wipe out its working capital loans on which it has a huge yearly interest burden _ interest payments in 1998-99 are expected to be around Rs 110 crore. External borrowings of the airline are around Rs 4,000 crore.
Air-India is also keen to reduce its productivity-linked incentives which amount to around Rs 150 crore a year, a high fixed cost in the non-operating account. The airline has recently written to unions, asking them to renegotiate this agreement.
A further infusion of Rs 500-600 crore to refurbish its assets and fleet is also being sought by the carrier. While the carrier can cut its operating losses, it cannot wipe out its balance sheet problems. Projected losses in 1998-99 are Rs 341 crore but operating losses are expected to be less than Rs 180 crore in 1998-99.
Various justifications exist for the fund infusion since the carrier has spent huge amounts in meeting social obligations. These include nine rescue operations for non-resident Indians (NRIs), the latest from Indonesia. The carrier has also been forced to operate VIP
flights for the last 25 years, which disrupted its schedule and led to losses. Tourism promotion and Haj traffic have also acted as a drain on the airline's resources.
However, no subsidy has been given to the airline since 1953. The total assets of the company are estimated at around Rs 20,000 crore while the equity base is Rs 154 crore. The debt-equity ratio of the carrier is 8:1.
Government officials said while the Kelkar Committee had asked for Rs 500 crore as support in the 1998-99 Budget, the committee was yet to make its final recommendations as a package. ILFS, which studied the various options available, has suggested that over Rs 1,000 crore be provided in different ways to the carrier to ensure that its net worth does not become zero by 1999-2000.
However, the contours of the package will only be clear after the chairman of the committee, Vijay Kelkar, provides his final recommendations.