Wednesday, August 08, 2018

Modi Govt Plans to Follow UPA’s Air India Bailout Formula; Turnaround Plans on Hold?

New Delhi: The UPA government failed to find a solution to the Air India mess, continuing to feed this white elephant till its last days. It had approved a mammoth bailout package with annual equity infusion to strengthen the balance sheet of Air India and these infusions continue till today.

When the Narendra Modi government came to power, there were widespread expectations that it would rid the nation of a cash guzzler like Air India. And it did make a feeble attempt to sell off the perpetually loss making airline. But that one, half-hearted attempt bombed and things are back to square one. So now, following in the footsteps of the UPA, the Modi government is also mulling a fresh bailout package for Air India. One is not clear whether this is in addition to continuing equity infusion under the UPA package or not.

A recent news report quotes unnamed officials of the ministry of civil aviation to say discussions are ongoing with the Finance Ministry for a Rs 11,000 crore bailout package for Air India. “Sources in the know said that the civil aviation ministry is working on a bailout package for the carrier, which would be utilised to reduce high cost working capital loans. The proposal, which is at a preliminary stage of discussions, is for providing around Rs 11,000 crore package to Air India.”

Under the UPA-approved Turnaround Plan (TAP), all government guaranteed aircraft loans and interest thereon are being paid by the government by way of equity infusion. And under a Financial Restructuring Plan (FRP) which runs concurrently, high cost working capital loans have been converted into long term debt carrying lesser rates of interest to reduce the financial burden on AI.
08/08/18 Sindhu Bhattacharya/