Kelkar May Clear Funds For Ia

Indian Airlines is planning to push for the implementation of the entire Rs 922 crore Kelkar committee package with Vijay Kelkar, the chairman of the committee, now the Union finance secretary.

Sources in Indian Airlines said, now that Kelkar is the finance secretary, chances of the funds being released are good. The Budget has already sanctioned Rs 125 crore in the form of equity injection in 1998-99 for the carrier.

The committee had recommended compensation worth Rs 200 crore for grounding of A-320 aircraft and a subordinated loan worth Rs 150 crore, which the finance ministry has not yet extended.

 

In fact, the ministry had suggested that it will offer the carrier 10 per cent margin money to finance its fleet expansion plans. Indian Airlines, however, not in favour of this.

Fresh equity injection was given approval as it was felt that the airline would be able to tap the market with a bigger equity. "The current levels of capitalisation are inadequate to sustain the growth plan envisaged over the next few years,'' the Kelkar committee had pointed out.

It said a bigger equity base would not only enable the airline to realign its presently unacceptable levels of leverage but would also serve as an indicator of the Government's commitment towards Indian Airlines.

The ministry opposed the compensation of Rs 200 crore for grounding A-320 aircraft, saying if it started this trend, it will be forced to compensate several other government owned organisations.

A planning commission panel that went into the issue was against extension of government loan worth Rs 150 crore as an interest-free subordinated debt. It was pointed out that the airline could easily raise the loan from outside and the Government need not be burdened further.

The rest of the capital injection consists of contribution by IA worth Rs 363 crore, employees' stock option worth Rs 50 crore and aviation turbine fuel price differential worth Rs 34 crore.