GoM meets next week to discuss revival.
The Group of Ministers (GoM) on government-owned Air India is discussing a proposal for an additional Rs 1,800 crore of equity infusion in the ailing airline for the current year.
This infusion would be additional to the Rs 1,200 crore already announced in the Budget for the current year. A top official involved in the development said: “The government might give an additional Rs 1,800 crore, with which the total equity infusion will be Rs 5,000 crore.” The government had earlier infused Rs 2,000 crore in the carrier increasing its equity base from Rs 145 crore to Rs 2,145 crore.
The total proposed increase in equity base will improve its debt to equity ratio. As of now, it has debt of Rs 46,950 crore on an equity base of Rs 2,145 crore. The GoM has also approved payment of Rs 532 crore for the operation of VIP and evacuation flights.
| DEBT TRAP |
| * Cash-strapped carrier has a debt of Rs 46,950 cr on an equity base of Rs 2,145 cr |
| * Has been demanding an equity infusion of Rs 43,000 cr till 2021 |
| * Government had earlier infused Rs 2,000 cr in the carrier increasing its equity base from Rs 145 cr to Rs 2,145 cr |
| * Additional infusion will be over and above the Rs 1,200 cr announced in the Budget for the current financial year |
Of AI’s Rs 46,950 crore of debt, loans for aircraft buying are Rs 20,185 crore, working capital loans are Rs 22,165 crore and the others are overdues. The accumulated loss has crossed Rs 20,000 crore, with the airline losing Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, Rs 5,551 crore in 2009-10 and Rs 6,000 crore in 2010-11.
The GoM is meeting next week to discuss the financial turnaround plan prepared by SBI Caps and vetted by Deloitte. AI is demanding an equity infusion of Rs 43,000 crore till 2021. For the current financial year, it wants infusion of Rs 8,373 crore, an upfront equity infusion of Rs 6,600 crore and support of Rs 1,772 crore in the form of a guarantee on short-term loans for this financial year.
The fund requirements of the cash-strapped airline are huge. It has to repay Rs 20,415 crore worth of loans before the end of this financial year. In a communication to the Prime Minister’s Office and the finance ministry a few days earlier, the AI management pegged the overdue amount at Rs 4,489 crore.
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The dues include Rs 2,300 crore to oil marketing companies, around Rs 800 crore to airport operators and Rs 400 crore to other vendors. Prime Minister Manmohan Singh, in a recent interaction with media editors, said he’d asked the finance minister to expedite the financial restructuring.
The airline proposes to issue redeemable preference shares for Rs 7,400 crore, of the Rs 22,165 crore working capital loans, with eight per cent dividend. It also proposes steps to enable it to repay Rs 11,100 crore of loans at 11 per cent interest over a 15-year period.