Oil PSUs stop ATF supply to AI, resume after hectic parleys

Flight operations of the ailing national carrier were not affected as the oil companies stopped supplies from 1600 hours at some stations including major ones like Delhi, Mumbai, Chennai and Kolkata, but resumed within an hour.

"Indian Oil, Bharat Petroleum and Hindustan Petroleum have from 1600 hours stopped aviation turbine fuel (or jet fuel) supplies to AI," a senior industry official said. Soon thereafter, another official said the matter has been resolved and jet fuel supplies restored after hectic parleys between officials of the two Ministries and Air India.

Air India was put on cash-and-carry mode of debit from December last year on account of non-payment of Rs 2,200 crore dues to the three state-run oil companies. Under cash-and- carry, supplies are made only when cash is paid.

The oil companies are understood to have been informed that the airline would be paying its daily dues from tomorrow. Severe cash crunch has led Air India to previously default on payments, affecting its flight schedules.

The officials said that the oil companies had together decided to curtail supplies by 20 units, which would have hit flights from the major metros. Air India officials heaved a sigh of relief after the supplies were restored within an hour.

However, oil industry officials maintained that the issue of non-payment of dues was "still not resolved".

They said cheques issued by Air India for its daily purchases, which total to about Rs 16.5 crore, bounced, prompting the oil firms to take such action.

Air India's cheque of Rs 3.4 crore to Bharat Petroleum Corp Ltd (BPCL) and Rs 2.7 crore to Hindustan Petroleum Corp Ltd (HPCL) had bounced. AI also defaulted on payment of about Rs 10 crore to Indian Oil Corporation, they said.

Air India has to pay Rs. 16.5 crore to oil companies daily as per the agreement between the companies and the national carrier. It gets around 225 kilo litre of aviation turbine fuel daily to meet its requirements.

In June, the oil firms had been directed by the government to meet the carrier's requirements for three months to allow it to carry out its daily operations after Civil Aviation Minister Vayalar Ravi met Petroleum Minister S Jaipal Reddy to sort out the issue.

Due to the fuel-supply restrictions, the airline was then being forced to combine and even curtail between 10 and 15 per cent of its flights on a daily basis. It runs an average of 320 flights daily.

Air India was awaiting release of funds sanctioned by the government as well as some banks, sources said.