The much-awaited revival plan for Air India is likely to be approved on Thursday by the cabinet committee on economic affairs (CCEA). Apart from restructuring its debt, which would ease its interest burden by almost Rs. 1,000 crore, the ailing national carrier may also be allowed to issue government-guaranteed bonds worth Rs. 7,400 crore.
A Group of Ministers, headed by finance minister Pranab Mukherjee, had earlier approved the restructuring plan.
One of the major financial problems for AI is the high rate of interest (13-14%) it currently bears on the working capital loan of Rs. 22,165 crore. According to the cabinet note, Rs. 11,000 crore of this loan will be transformed into long-term loans with 10% interest rate.The government may approve conversion of another Rs. 7,000 crore of the loan into cumulative preference shares capital. For the remaining amount, the government may offer additional cash credit to the ailing airline.
However, a section of the opposition has already expressed doubts over the viability of the revival package.
CPI leader Gurudas Dasgupta has shot a letter to Prime Minister Manmohan Singh, pointing out that "on the whole, the loan (approved by the GoM) that is being provided is costly, and it may be difficult for AI to bear the cost".
While the finance ministry and civil aviation ministry are keen on seeing that the turnaround plan gets approved in the CCEA, a section of the union cabinet is opposed to such pumping of funds into a commercial entity.
A top social sector minister had earlier met finance minister Pranab Mukherjee and planning commission deputy chairperson Montek Singh Ahluwalia, and asked him to stop funding Air India.
Public procurement bill too
Intending to introduce it in the second half of the budget session, the union cabinet is likely to approve the public procurement bill on Thursday.
The bill is seen as a key promise for bringing more transparency into the process of awarding all civil work, service contracts and goods purchased by government departments over the value of Rs. 50 lakh.
The bill proposes a jail term of up to five years for public servants found guilty of seeking bribes from bidders for government contracts and supplies. Annual government spending on procurements is between Rs. 2.5 lakh crore to Rs. 3 lakh crore, about one-fourth of the union budget.