Rs800 crore equity aid will do little for Air India

New Delhi: The group of ministers (GoM) may have recommended Rs 800 crore equity assistance to Air India as a short-term measure, but this amount is unlikely to help the ailing airline in any significant way.
The GoM, which met recently under the chairmanship of finance minister Pranab Mukherjee, has recommended this amount be released as equity assistance to AI for November and December and that the money should reach the airline (subject to approval by the Parliament) by January.
But Rs 800 crore is hardly enough. The gap between revenue generation and expenditure for AI stands at over Rs 4,000 crore a year and to tide over monthly payments and other expenditure, AI has already sought enhancement in working capital limit by Rs 3,000 crore.
Official sources said that against a demand for Rs 3,000 crore, AI's board of directors has allowed it to raise loans of Rs 1,000 crore as working capital.As on date, AI has an equity base of Rs 145 crore, working capital loans of about Rs 16,000 crore and needs about Rs 45,000 crore in tranches to complete an ambitious aircraft purchase order.
Sources also confirmed that the earlier proposal of the ministry of civil aviation, seeking about Rs 2,000 crore (over and above the equity demand of Rs 5,000 crore) as soft loan from the government is also in limbo.
18/11/09 Sindhu Bhattacharya/Daily News & Analysis

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Categories: NACIL Nov 2009