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Out of fuel money, AI grounded

Bleeding national carrier Air India was in for a major shock on Friday. State-owned oil firms Indian Oil, Hindustan Petroleum and Bharat Petroleum cut off supplies of jet fuel to the carrier. AI is getting fuel for which it has paid for.

delhi Updated: May 28, 2011 01:56 IST
HT Correspondent

Bleeding national carrier Air India was in for a major shock on Friday. State-owned oil firms Indian Oil, Hindustan Petroleum and Bharat Petroleum cut off supplies of jet fuel to the carrier. AI is getting fuel for which it has paid for.

The fallout — more than 20 flights, out of the 320 AI operates daily, were cancelled. The problem remained unsolved till late on Friday. The aviation ministry told AI to draw up a contingency plan to contain the damages in the coming days.

Oil firm officials said AI, which owes Rs 2,400 crore, buys jet fuel worth Rs 18.5 crore per day from the three oil PSUs, but it pays only Rs 13.5 crore.

"We served a notice on AI last week and clearly mentioned that jet fuel supplies will be stopped as it has repeatedly defaulted fuel bills payment," an oil company official said.

"In May, they changed the terms and conditions and AI was told to pay Rs 16 crore daily. This arrangement was for the entire month but oil firms disrupted supplies on Friday," an AI official said. AI requires 130 kilolitres of fuel daily.

Oil PSUs had first put the ailing carrier on notice to get its daily fuel on cash-and-carry sales model in December last and asked it to pay the debts that rose due to the recent spate of increase aviation turbine fuel (ATF) prices. After that AI was paying an average of Rs 13.5 crore per day.

In March, AI had urged the Centre to ask the oil firms for discounts as was given to the private airlines. The issue was discussed at a meeting called by cabinet secretary KM Chandrasekhar where AI had pointed out that oil PSUs gave a Rs 1,600-1,800 per kilo litre discount to private carriers.

But oil PSUs said AI was only discussing payments for future ATF purchases and there was no word on how it would clear the outstanding bills.