Poor record? AI must pay for fuel upfront

New Delhi: Financially crippled Air India-Indian Airlines combine has come within a whisker of having its aircraft grounded from next week due to non-payment of jet fuel dues. With arrears mounting to Rs 2,000 crore, oil marketing companies (OMCs) have threatened to put the airline on cash-and-carry from Tuesday, which means AI pays upfront for getting tanked up and fly, something that the cash-starved airline simply can’t do.
To avoid getting grounded, the board of the merged entity, National Aviation Company of India Ltd (NACIL), met here on Saturday and enhanced working capital limit (amount a company is authorized to borrow from banks to meet daily operational costs like fuel, wages and airport charges to remain functional) by a whopping Rs 1,000 crore. Now, AI’s working capital limit has been enhanced from Rs 17,000 crore to Rs 18,000 crore.
Essentially, this means NACIL will be able to borrow another Rs 1,000 crore and tell OMCs that it will clear the dues. Most importantly, it now hopes to retain its credit period of three months and avoid being put on cash-and-carry. While banks shy away from giving loans to business houses in doldrums, AI’s state-owned status gives them the comfort of government backing for eventual repayment. ‘‘Threats of being put on cash-and-carry are routine to get money. One state-owned company can’t do this to another government concern,’’ said a senior official.
21/02/10 Saurabh Sinha/Times of India

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Categories: NACIL Feb 2010