Govt’s spending cuts likely to hit Air India’s turnaround plan

Business

The government's infusion plan of over Rs 30,000 crore in Air India over a period of nine years starting 2012-13 seems unlikely to be fulfilled. The gross budgetary support (GBS) to the civil aviation ministry over the 12th Plan Period does not even suffice for the infusion planned in the national carrier over this period.

According to Air India's turnaround plan, the government is to infuse Rs 24,400 crore in the carrier from 2012-13 to 2016-17.

"On the contrary, the planning commission has provided us a gross budgetary support of Rs 16,980 crore over the plan period. This money is not sufficient to take care of the committed infusion in the national carrier, leave aside the other commitments we have" said a senior civil aviation ministry official.

The official added that he sees no reason behind not releasing the money for Air India, when the Union Cabinet had approved the same.

According to the civil aviation ministry official, their total outlay over the 12th Plan Period is around Rs 49,000 crore.

Of the total money, around Rs 33,000 crore were to come as GBS and the rest would have been the internal generation of the ministry. But with the reduced GBS, equity infusion in AI is uncertain.

The government has also defaulted on the equity infusion promised to Air India in the current fiscal, the first year of its recovery plan, in an attempt to cut spending to control the fiscal deficit.

Of the infusion of Rs 10,600 crore for the current fiscal, Air India got Rs 6,000 crore in the first year. There is no commitment on infusion of the rest of the money.

However, due to the unavailability of promised money, Air India is forced to borrow money from banks and clear their dues that are at a higher interest rate. The airline plans to borrow Rs 1,700 crore to service a part of its dues of vendors, who charge interest rate of around 16 per cent on it.

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