Govt plans to hike A-I, IA equity base

The government will increase the equity base of the two state-owned carriers "" Air-India and Indian Airlines "" to help them raise funds to acquire more aircraft and expand their networks.

Civil aviation minister Praful Patel on Monday held discussions with Planing Commission deputy chairman, Montek Singh Ahluwalia, on the issue of funding the two airlines and ways to boost the country's airport infrastructure.

"Both the airlines are undercapitalised. We need to increase the capital base of both Air-India and Indian Airlines," said Patel after the meeting.

The meeting also discussed the government's role in the Rs 20, 000-crore fleet acquisition plans of both the carriers and what role should the government play in this exercise. Most of this fund would be raised from international consortiums as loans.

The government also thinks that increasing the capital base will come handy when the two airlines get the final go ahead from the government to acquire additional aircraft to boost their fleet. The government is of the view that the two carriers would require an enhanced equity base to attract international lenders.

"Both the airlines need an enhanced equity base to get the kind of loan component they require to fund the fleet expansion plan. With the current equity base, many international lenders will not be ready to provide the funds the two companies would require," Patel said.

The additional equity support can come from the Rs 14,000 crore support provided by the government in the Budget to public sector enterprises in the form of equity and loans.

Air-India's total paid-up capital is Rs 153.84 crore, while Indian Airlines has a paid up capital of Rs 105.19 crore. In fact the previous Budget has provided Rs 325 crore to Indian Airlines to enhance the airline's equity. This is likely to be linked to fleet acquisition. "We are not against it being linked to fleet acquisition," Patel said.

The meeting also discussed the role of the government in the modernisation of the non metro airports in the country. Patel had announced a Rs 5000 crore plan to modernise about 10 airports in the country. "We held preliminary discussions today. The civil aviation ministry make a detailed presentation to the commission in the next few days," Patel added.