Stuck with a huge fiscal deficit, the government has defaulted on the equity infusion plan for Air India spread over a period of nine years in the first year itself.
Of the infusion of Rs 10,600 crore for the current fiscal, Air India is likely to get Rs 6,000 crore in the first year and the rest will be cleared in the next fiscal.
“Air India will get Rs 6,000 crore as equity infusion from the government. Of the money, Rs 4,000 crore was announced in this year’s budget and the government will give Rs 2,000 crore more for the current fiscal. However, we have been assured that the rest of the money will be released in the first month of the next fiscal,” said a senior civil aviation ministry official.
As part of the turnaround plan cleared by the Cabinet, Air India is to get an equity infusion of over Rs 30,000 crore over a period of 9 years starting from 2012-13. In the first year, the airline was to get Rs 10,600 crore as equity infusion. The short-term debt of Rs 18,000 crore has been restructured.
According to the debt restructuring package, around 60 per cent of the airline’s short-term debt was to be converted into long-term and the rest is to be returned to the bank through money raised by a bond issue with sovereign guarantee. Due to the unavailability of money, the airline plans to clear a part of its dues attracting high interest cost by lower-cost borrowings from banks and approach the banks for loans after the repayment of a part of short-term debt through accruals of the bond issue by mid-December.
“Now, the airline is looking at the option of servicing its high-cost dues, which attracts an interest rate of 15 to 16 per cent, through a lower interest rate bank borrowings. With the repayment of a part of Air India’s short-term debt, they will get a window of around Rs 1,700 crore more borrowings from banks,” said the official.