Air India bailout hits turbulence

New Delhi: The cabinet committee on economic affairs (CCEA) has turned down a second equity infusion amounting to Rs1,200 crore for Air India Ltd on grounds that it had failed to meet some promised targets, potentially leaving the state-run carrier in financial limbo.
Air India received an equity infusion of Rs800 crore from the government in the last fiscal. It was to receive a further Rs1,200 crore in the current fiscal conditional on meeting some targets, including revenue generation and cost cuts.
The equity infusion is critical for the airline’s cash flow as well as to raise more capital that would help it pay back some of its Rs18,000 crore of debt.
A government official familiar with the matter said CCEA had made it clear that it cannot approve the release of the money until an exception is okayed by a group of ministers (GoM) that had specified the targets for Air India to achieve.
The aviation ministry has now sent the proposal to finance minister Pranab Mukherjee, who headed the GoM, seeking an exception to the rules before it can go back to CCEA.
“The fear is that they (GoM) may put new conditions, which may be even tougher to meet for the airline,” the government official said.
The airline may also find it very difficult to persuade the government to open its coffers further to release an additional Rs2,000 crore equity infusion it has been hoping to seek unless it meets its targets.
28/10/10 Tarun Shukla/Live Mint

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Categories: NACIL Oct 2010