Budget may bring some good news for AI

Budget may bring some good news for AI

By: || Updated: 26 Feb 2012 01:51 AM

There could be some good news for ailing Air India in the
upcoming budget with the government considering a support package of about
Rs 10,000 crore for it, including Rs 6,600 crore worth of equity infusion.

The Union Cabinet is expected to consider this package shortly to enable
inclusion of the provision in the general budget, official sources said,
adding that a Cabinet note has already been circulated for comments from
various ministries.

The cash-strapped airline is likely to get a Rs 10,000 crore package in
the next financial year, including additional equity of Rs 6,600 crore and
other support, the sources said.

The move comes two weeks after a Group of Ministers, headed by finance
minister Pranab Mukherjee, cleared the financial restructuring plan for
the cash-starved national carrier, allowing it to raise Rs 7,400 crore by
issuing government-guaranteed bonds or other means.

The bond is likely to carry a coupon rate of 8.5-9 per cent and financial
institutions, who have lent money to Air India, may subscribe to these
bonds, the sources said.

The entire package was suggested by the GoM as part of the airline's
financial restructuring and turnaround plan. The government has invested
Rs 1,200 crore this year, taking Air India's equity base to Rs 3,345

The infusion of funds would come in time for Air India to induct the
much-delayed Boeing 787 Dreamliner aircraft, the first of which is likely
to join the fleet in April.

Official figures show that the debt-ridden carrier has outstanding loans
and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working
capital loan, Rs 22,000 crore is long-term loan on fleet acquisition, Rs
4,600 crore is vendor dues. It has an accumulated loss of Rs 20,320 crore.

Banks and financial institutions had proposed several measures to beef up
Air India's net worth and these were among the proposals approved by the
GoM, the sources said.

Air India's debt restructuring plan had hit a hurdle after the banks had
refused to convert a part of the short-term debt into equity.

As per the earlier plan, the banks were to restructure a debt of Rs 18,000
crore, of which around Rs 10,500 crore would have to be converted into
long-term with a repayment period of 10-15 years and the rest was to be
converted into equity by banks. The banks had raised objections to this.

This situation had prompted the GoM to permit Air India to raise resources
through bonds or non-convertible debentures, the sources said.

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