AI bailout package to be finalised next fortnight

The ministry officials will present the proposals before the second meeting of the high-level Committee of Secretaries headed by Cabinet Secretary K M Chandrasekhar on August 29, official sources said on Sunday.

At the first meeting of the committee on financial restructuring, the Air India on Saturday had sought an immediate loan of about Rs 10,000 crore from the government along with an annual equity infusion of Rs 2,500-Rs 3,000 crore for the next four to five years. 
While the government may make only a partial contribution, which may be limited to Rs 2000-2500 crore, a major part of which is likely to be through partial disinvestment of government equity or issuance of an Initial Public Offer, sources said.

Officials of the Finance and Civil Aviation Ministries, after holding discussions with Air India officials, would finalise the package proposals in the next 15 days, they said. The CoS, which is slated to meet every month to monitor implementation of its recommendations, would again meet on August 29 to examine the proposal.

After finalising the proposal, it would be sent to the Union Cabinet for its approval, sources said, adding that the much-needed funds would be released by the government only after this meeting.

The government funding, either in the form of a loan or equity, would be linked with aircraft deliveries.

Air India, which is estimated to suffer a loss of Rs 7,200 crore in 2008-09, has been overburdened by its working capital borrowings worth Rs 17,000 crore. It has overdrafts from 15 banks. The carrier wants government to underwrite at least Rs 10,000 crore of this burden.

The government on Saturday asked the Finance Ministry to examine the extent of a financial bailout for the airline, and also the Petroleum Ministry to extend the credit limit on jet fuel for at least three more months.

This was decided at the first meeting of a high-level committee headed by the Cabinet Secretary, which vetted the ailing carrier’s plans to cut costs and generate revenue as also its fleet renewal plans to meet the intense competition in both domestic and international arena. The implementation of the cost cutting measure also poses a challenge to the airlines as its annual wage bill is Rs 3,100 crore. But, the union may not agree to salary cuts.

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