FinMin to finalise bailout package for AI next fortnight

FinMin to finalise bailout package for AI next fortnight New Delhi: The Finance Ministry would give a final shape to a bailout package for Air India over the next fortnight and present it before the second meeting of the high-level Committee of Secretaries on August 29, official sources said on Sunday.

At the first meeting on its financial restructuring yesterday, Air India had sought government's urgent help and urged for equity infusion of about Rs 2,500 crore and a soft loan of Rs 10,000 crore for five years.

While the government may make only a partial contribution, a major part of this package is likely to be through partial disinvestment of government equity or issuance of initial public offer, sources said.

Officials of the Finance and Civil Aviation Ministries would sit with those from Air India in the next 15 days to finalise the package proposals as discussed yesterday by the Committee of Secretaries (CoS), they said.

The CoS, which is slated to meet every month to monitor implementation of its recommendations to bring the national carrier back to shape, would again meet on August 29 to vet the proposal.

Once finalised, the proposal would be sent to the Union Cabinet for its approval, sources said, adding that the much-needed funding for Air India would be released by the government only after this.

The government funding, either in the form of 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 yesterday 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 Cabinet Secretary K M Chandrasekhar, which vetted the ailing carrier's plans to cut costs and generate revenue as also its fleet renewal plans to meet intense competition in both domestic and international arena.

Bureau Report