The finance ministry is of the opinion that the aircraft acquisition plan of the public sector Indian Airlines should be deferred till its divestment process is over.
The proposal to buy 43 aircraft at a cost of over Rs 10,089 crore to replace the ageing fleet of the airline has been under the examination of the Public Investment Board of the finance ministry. Government sources said the proposal cannot be cleared unless a policy decision is taken on whether a company shortlisted for disinvestment should be allowed to tap the markets. They said the fleet expansion plans of the Shipping Corporation of India had also faced similar objections.
The civil aviation ministry has been pressing for a decision on the issue because it is keen to place the orders for new aircraft by March 2003. But the finance ministry is concerned that though the immediate budgetary liability of the Centre will be only Rs 325 crore as additional equity support for the airline, the rest of the funds for the cash-strapped airline will come through only if the government extends a letter of comfort. Finance ministry sources added the civil aviation ministry had asked for close to Rs 14,000 crore.
Sources said the civil aviation ministry had proposed the letter of comfort for the airline can be pledged against the future receivables of the airline. But they said with the airline having a negative net worth, the civil aviation ministry had asked for a waiver of even the half a per cent guarantee fee.
For extending any counter-guarantee for a project, the Centre charges an interest of half a per cent for the sum covered under the guarantee. Without such a guarantee, North Block sources said it would be impossible for the company to raise any loans in the domestic or foreign market at competitive rates.
The disinvestment issue is significant because last year too a plan to beef up the fleet strength had to be shelved. But with the government deciding to take up the disinvestment of other companies, the civil aviation ministry had been encouraged to move the file on the presumption that disinvestment in the Indian Airlines has been shelved for now.
On its part, the disinvestment ministry has said the only reason why disinvestment has been delayed is the lack of bidders. The ministry has told Parliament disinvestment in both Indian Airlines and Air-India is a
