Reeling under huge debt, Air India is set to get an additional equity of Rs. 980 crore from the central government. The development comes after the Air India, which does not have money to service debt, had requested the government for an additional capital.
The Economic Times reported that a major part of these funds around Rs. 550 crores will be used to service interest on nonconvertible debentures (NCDs) that are due in September-end. Earlier, as a turnaround plan, Air India has issued government-guaranteed NCDs worth Rs. 7,400 crore to repay bank loans.
One of the senior Air India officials said that "The rest of the money will be used to pay for spares for our planes, which are currently on ground and will soon be flying. We will also be paying our international and other vendors," said a senior Air India official who did not want to be identified.
The additional funds would be the part of the government plan which had decided to infuse Rs. 30,231 crore over a period of nine years as part of the turnaround plan approved in January 2013 by the UPA government. The national carrier would now have received Around Rs. 29,730 crores or 98% of the proposed equity.
In a communication to the finance ministry, the aviation ministry had sought for an urgent Rs. 500 crore or else the Air India would start defaulting on its loans repayments.
There was a delay in the infusion of the equity this time because the upper house, Rajya Sabha could clear the proposal during the monsoon session. The government has to wait an additional 14 days to release the fund.
It is to be noted that this amount of Rs. 980 crore is over and above the Rs. 1,500 crore government-guaranteed loans that the airline received from India's Bank of Baroda. Last month, international vendors and leasing companies had threatened the airline to take legal action on non-repayment of dues in time.
The money received through this short-term loan is already being used up and even after a series of bailouts by the government from time to time the, the financial position of air India remains grim.
