Rs 138 cr for IA to pay Vayudoot debt

The Cabinet today approved a Rs 138-crore non-budgetary package for Indian Airlines to clear the liabilities arising out of the 1993 merger of Vayudoot, the failed feeder airline of the national carrier.

Indian Airlines will use this one-time assistance to clear the dues of Vayudoot's major creditors, like Hindustan Aeronautics Ltd and Oil and Natural Gas Corporation.

"The civil aviation ministry's proposal for a grant to the airlines to pay off the outstanding dues of Vayudoot has been approved," Finance Minister P Chidambaram told reporters after a meeting of the Cabinet Committee on Economic Affairs.

According to a government release, the grant will also be utilised to write off the Rs 15.97 crore owed to the civil aviation ministry and Rs 3.1 crore to the finance ministry. At the time of the merger, Vayudoot had total liabilities of Rs 185.91 crore, while the book value of its assets was only Rs 14.71 crore.

Though the feeder airline ceased to exist in 1993, its new owner Indian Airlines was provided a breather in the form of a five-year moratorium on the repayment of dues owed by Vayudoot. The airlines could then clear it in 10 annual instalments.

On the expiry of the five-year period, the freeze was extended by another two years, which too expired in 2000. Thereafter, the creditors started pressing the airlines for repayment and one of them, the Bank of India, even went to court.

Consequently, the civil aviation ministry moved the Union Cabinet for a bailout package and a retrospective approval of another extension of the moratorium till December this year.

One of the proposals before the Cabinet was to write-off dues amounting to Rs 178.78 crore of a total of Rs 185.91 crore and advise Indian Airlines to discharge the balance towards banks and others.