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Sunday 20 August 2017
News updated at 1:54 AM IST

Panel raps Finance Ministry for reduced allocation to AI

Shemin Joy, NEW DELHI, March 18, 2017, DHNS 0:18 IST

Unimpressed by the reduction in allocation for Air India, a Parliamentary panel has rapped the Ministry of Finance, saying all factors should be considered before finalising the amount allocated, in order to revive the national carrier.

The Parliamentary Standing Committee on Transport, Tourism and Culture said that reduction of equity infusion by Rs 787 crore in 2017-18 Budget will “adversely affect” Air India’s financial and operational performance.

“It may be forced to take loans from banks and financial institutions at a higher interest rate to meet the shortfall, which was not contemplated under the Financial Restructuring Plan,” the panel headed by Trinamool Congress MP Mukul Roy said. In 2017-18, the government has allocated Rs 1,800 crore for equity infusion in the national carrier as against Rs 2,587 crore as per the Turn Around Plan and Financial Restructuring Plan (TAP/FRP) envisaged in 2011 to help the carrier. The Committee said “such short fall”, at this stage when the company is at a “critical position” in achieving the TAP targets, should be avoided.

“Since the committed financial support from the government is vital to sustain the momentum of performance of Air India, the committee strongly recommends that the full amount of equity infusion should be restored to Air India,” it said. The panel also wanted the Finance Ministry to ensure that the amount committed under the TAP should be allocated to Air India.

On Civil Aviation Secretary R N Choubey’s submission that Air India’s profit was severely dented by around Rs 1,000 crore due to rupee depreciation and foreign exchange variation, the committee said these points were not taken into account while deciding on equity infusion.

The panel said, “if the intention of the Ministry of Finance is the revival of Air India, then the former should seriously consider the factors which are beyond the control of Air India such as depreciation of rupee and foreign exchange variation, while deciding the amount of equity infusion.”

The ministry informed the panel that the shortfall in equity infusion would create “undue liquidity” issues and would be “unable to meet” its financial commitments and maintain the operational efficiency.

The equity infusion sought by the ministry included Rs 1,861 crore for payment of principal or interest on government guaranteed loans and debentures.

If Air India is not able to repay, it may lead to the invocation of the government guarantees and downgrading of credit ratings.

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