Chidambaram wades into Air Indias revamp programme

New Delhi/Mumbai: Union home minister P. Chidambaram has criticized the civil aviation ministry's plan to revamp Air India, saying that a proposed equity infusion into the loss-making and debt-laden flag carrier would not go far enough to ensure its survival.
Chidambaram, a former finance minister, questioned the revamp plan at a November meeting of the group of ministers (GoM) that deals with Air India issues, according to the minutes of the meeting reviewed by Mint.Critical note: Union home minister P. Chidambaram. Madhu Kapparath / MintThe criticism makes the next meeting of the GoM, to be held on 3 February, crucial for the plan to be carried forward. Allocation of money in the next Budget for Air India's bailout may also be affected by Chidambaram questioning the viability of the revamp.The GoM, headed by finance minister Pranab Mukherjee, decided in November to infuse capital into the airline in tranches of Rs400 crore, based on monthly reviews of cost-cutting measures by the airline, run by the National Aviation Co. of India Ltd (Nacil).
A final clearance from the finance ministry, which had been expected by January-end, is yet to come. Going by a monthly infusion of Rs400 crore, the state-owned firm was expecting Rs2,000 crore from the government this fiscal, which has been capped at Rs800 crore now.According to the minutes of the November meeting, Chidambaram wants the airline to put together a proper plan to reform its balance sheet.
The home minister said the proposed equity infusion may not be sufficient for the survival of the airline, which he thought might even need to declare a moratorium on debt repayments, according to the minutes.
Chidambaram said that in three years the company will only be Ebitda-positive, and that the statistics provided did not present a "correct picture" and "true state of Nacil as a company".Ebitda, or earnings before interest, taxes, depreciation and amortization, is an approximate measure of a company's operating cash flow.
28/01/10 Sangeeta Singh, Tarun Shukla and P.R. Sanjai/Live Mint

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Categories: NACIL Jan 2010