Kingfisher pays 40% of overdue fuel bill to HPCL

Under pressure from Hindustan Petroleum Corp Ltd, Kingfisher Airlines has repaid 40 per cent of its overdue fuel bill and has agreed to give bank guarantee as insurance against default on future jet fuel purchases.

Under pressure from Hindustan Petroleum Corp Ltd, Kingfisher Airlines has repaid 40 per cent of its overdue fuel bill and has agreed to give bank guarantee as insurance against default on future jet fuel purchases.

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Hindustan Petroleum Corporation Limited (HPCL) is Kingfisher Airline's (KFA) largest aviation turbine fuel (ATF) supplier and jet fuel (or ATF), like in case of other airlines, is sold on a 60-day credit.

The cash-strapped airline had, however, run an outstanding of Rs 298.80 crore over and above the agreed credit period.

"We have vigorously pursued the issue with Kingfisher as a result of which the Rs 298.80 crore overdue outstanding as on March 4, has been reduced by Rs 122.17 crore," a highly placed company source said.

As on May 21, KFA owes a total of Rs 479.35 crore to HPCL, of which only Rs 176.63 crore was in fuel bills that were unpaid even after the 60-day credit period, he said.

The Vijay Mallya-owned airline has agreed to submit a bank guarantee of Rs 250 crore by June end. This collateral can be en cashed by HPCL in case Kingfisher was to default in future, he said.

KFA would liquidate the overdue outstanding in next couple of months. It would make part payment on disbursement of Rs 200 crore it has taken from State Bank of India and the balance from proceeds of KFA's proposed GDR issue by end of July, the source said.

The airline, he said, has agreed to sign legally binding settlement agreement on acceptance of the repayment schedule by HPCL.

KFA spokesperson could not be immediately reached for comments.

Oil Ministry had in March asked HPCL to invoke the corporate guarantee given by Vijay Mallya's United Breweries (UG) Group to recover dues and supply ATF in future only against a bank guarantee.

"We were told that KFA's overdue outstanding as on March 4 stood at Rs 602.05 crore. Based on this alarming situation... we asked HPCL to encash the Rs 250 crore corporate guarantee from United Breweries and Holding Ltd (UBHL) to recover the dues," a ministry official said.

"But as it turns out, this was not overdue outstanding. Overdue outstanding was less than half of this and the rest was as per agreed credit term," he said.

Actually, KFA as on March 4 owed HPCL Rs 554.38 crore. Of which only Rs 298.80 crore was overdue outstanding or fuel bills not paid within the agreed 60 day period. The rest was receivable on account of ATF sold with clear understanding that payments will be made after 60 days.