Taxpayers robbed to keep airlines afloat

Mumbai: Is the UPA government robbing Peter and Pappu to pay Paul? On Wednesday, the government announced that the airlines can repay their near-Rs3,000 crore overdues to oil companies over the next six months. And current fuel purchases will get a further 90-day credit period.
On Thursday, petroleum minister Murli Deora announced that the government would take a decision on lowering retail prices of petro-fuels in a week in view of the fall in the international prices of oil. Never mind that the fall in fuel prices has partly been offset by the fall in the rupee from around Rs40 in April this year to nearly Rs50 now.
Peter, in this case, is the hapless taxpayer, who will ultimately have to subsidise the losses of the public sector oil companies. Pappu is the investor in oil companies, who will find the share values of oil companies declining as the government keeps robbing them to subsidise Paul – in this case, the airlines and fuel users in general.
Just consider these facts. Indian Oil (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) have already borrowed Rs125,000 crore from banks and are dangerously close to their combined eligible limit of Rs140,000 crore. In other words, they are almost out of cash.
On Wednesday, they were literally arm-twisted by their political masters to extend easier ATF (aviation turbine fuel) credit from 60 to 90 days to Jet Airways, Kingfisher and Air India who already owe them a staggering Rs2,962 crore. The airlines assured them that this amount would be squared up by March, 2009, something that oil industry sources claim is “next to impossible” given their precarious financial state.
To add insult to injury, Deora hinted on Thursday that fuel prices could be revised downwards if crude reaches a level of $57 a barrel.
24/10/08 Murali Gopalan/Daily News & Analysis

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Categories: Indian Aviation- In General Oct 2008