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Provision for equity infusion into AI may figure in budget

india Updated: Feb 27, 2011 11:29 IST

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Provision for the much-needed equity infusion into ailing Air India and a proposal to liberalise fund-raising capability of the Airports Authority of India may figure in the 2011-12 budget to be presented in Parliament on Monday.

The two proposals, if accepted, would act as a big relief to both the public sector units which have been facing financial and liquidity crunch, sources said.

Air India is facing serious difficulties in meeting several of its liabilities.

It is confronted with an adverse cash-flow situation primarily because of high fuel prices, rise in costs on account of interest payments on aircraft purchases, depreciation costs and wage bill, besides high costs of leasing planes and maintenance.

Keeping this precarious situation in mind and the Civil Aviation Ministry's proposal for further infusion of funds, the government may provide another tranche of Rs 1,200 crore in the budget on Monday, the sources said.

If granted, this would be the third tranche of equity infusion, with the government already having given Rs 2,000 crore to the airline in two tranches in 2010 and in January this year.

Air India has incurred losses to the tune of Rs 1,791.38 crore in the first quarter of 2010-11, apart from the losses of Rs 5552.44 crore, Rs 5,548.26 crore and Rs 2,226.16 crore respectively in 2009-10, 2008-09 and 2007-08.

Regarding the state-run airports body, which is modernising several metro and non-metro airports across the country, the sources said the AAI has for long been pressing the government to raise funds by issuing infrastructure bonds, a proposal that was rejected by the Finance Ministry over a year ago.

The borrowing norms might be liberalised in the upcoming budget to give the AAI enough flexibility to raise resources from the market, the sources said.

One of the prime reasons for AAI's cash crunch is the continuing default by several airlines on payments for all services at airports, including landing, parking and navigation charges.

If the 2011-12 budget proposes to liberalise borrowing norms, it would help AAI to implement plans to borrow Rs 900 crore this year and Rs 800 crore next year to fund the upgradation of almost a dozen out of a total 35 non-metro airports.