Air India owes Rs 5,000 crore in dues, didn't pay for 2 years: Oil firms

National carrier cancels one flight, reduces load on seven others after OMCs pare supplies at six airports

Air India has been delaying payments by over four months for two years, Indian Oil said today a day after state state oil marketing companies (OMC) cut aviation turbine fuel supplies to Air India at six airports. Air India's overdue payments (including interest) over last few years have crossed Rs 5,000 crore and the mounting dues are impacting the working capital of the companies, it said.

The cash-strapped national carrier operates around 500 daily flights and those of its subsidiaries Air India Express and Alliance Air.  It uplifts around 250 kilolitres daily from Kochi, Mohali, Pune, Ranchi, Patna and Vishakhapatnam. Supplies were suspended last evening. Air India said it cancelled Kochi-Agatti on Friday because of disruption of supply. It operated seven other flights with reduced loads as it had to uplift fuel from other airports. The affected passengers will be accommodated on other flights, an Air India spokesperson said.

Air India was intimated on August 14 by oil marketing companies regarding discontinuation of supply. Similar notices were served earlier but withdrawn following assurances from the airline.

"However, despite repeated follow-up and reminders for payment by the OMCs, no major reduction in the outstandings materialised from the airline till date. That too after the ATF prices have  climbed down from a high of Rs 76,378 per kilolitre (kl) in November 2018 to  Rs 63,295 per kl currently," Indian Oil's executive director Subodh Dakwale said in a statement.

"As per the commercial terms agreed upon, Air India enjoys a credit period of 90 days. However, the credit period has since crossed the limit and has been at about 230 days for the past nearly two years. Despite this, the OMCs have been supportive of Air India throughout this period," he added.

"In the absence of equity support, Air India cannot handle the huge debt service liabilities,” the Air India spokesperson said. He added airline's financial health is improving and it’s moving towards a healthy operating profit.