Govt may offer Rs 26,000cr bailout to rescue Air India | india | Hindustan Times
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Govt may offer Rs 26,000cr bailout to rescue Air India

india Updated: Oct 21, 2011 03:03 IST
Tushar Srivastava

In what would possibly be the biggest ever helpline for a public sector undertaking, the government is likely to offer a Rs 26,000-crore bailout package for ailing national carrier Air India (AI) through a mix of debt transfer and equity infusion.

The government may pick up the tab for AI's ambitious purchase of aircraft by taking the onus of repaying Rs 20,185 crore taken as loan to fund the purchase.

This is likely to be the key recommendation of the group of officers (GoF) from the finance ministry vetting AI's turnaround and financial restructuring plan. The GoF is also likely to recommend a one-time equity infusion of around R6,000 crore in this fiscal itself for the state-owned carrier.

"This would be a massive boost for AI's revival and could bring it back to life," said MS Balakrishnan, former director, finance, of erstwhile Indian Airlines.

The GoF's recommendations would be accompanied by stringent conditions for cost control, increasing revenues, yields, on-time performance and better aircraft utilisation.

"It could prove to be a game-changer for AI as it would considerably ease cash flows, resulting in a saving of around Rs 200 a month in loan servicing, and enable it to meet its operational requirements such as expenses on salaries and fuel," an AI official said.

AI owes Rs 48,000 crore in loans and payments to vendors and has accumulated losses of around Rs 20,000 crore. As earlier reported by Hindustan Times, AI is already in the process of restructuring its working capital loan of Rs 22,165 crore, which would result in an annual saving of Rs 1,000 crore.