PSU Watch logo

| MNRE to infuse Rs 1,000 crore in SECI; plans to finance 3300 MW renewable energy projects |   | Govt relaxes rules, households need not install solar rooftop via listed vendors only |   | APTEL to hear Delhi Discoms plea to let them stop buying costlier power from NTPC’s Dadri I plant |   | Power plants staring at fresh coal shortage due to ‘bias’ |   | Arunachal Pradesh’s Sela tunnel project enters decisive phase: Defence Ministry |  

Air India promises new payment mechanism, OMCs continue jet fuel supply

State-run OMCs have decided to continue jet fuel supply to Air India after the airline came up with a new payment mechanism to clear old dues

Air India promises new payment mechanism, OMCs continue jet fuel supply
Air India promises new payment mechanism, OMCs continue jet fuel supply

New Delhi: State-run oil marketing companies (OMCs) have decided to continue jet fuel supply to Air India after the airline came up with a new payment mechanism to clear old dues. On October 18, the three OMCs — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) and Bharat Petroleum Corporation Ltd (BPCL) — had threatened to snap jet fuel supply to Air India over its failure to clear past dues.

IOC says no disruption in jet fuel supply to Air India

Commenting on the matter, a spokesperson from Indian Oil said, “Indian Oil never stopped ATF supply to Air India. There has been no disruption.” On being asked whether an agreement has been worked out by the three state-run fuel retailers and Air India or not, the spokesperson refused to comment and said that Indian Oil has been supplying air turbine fuel (ATF) to Air India as usual. Indian Oil supplies around 60 percent of Air India’s total requirement of jet fuel.

Has Air India committed to clearing past dues? And how?

According to a source aware of the matter, in a letter shot off to the national carrier late on Tuesday evening, the three OMCs have agreed to continue ATF supply to the airline as it has made a commitment towards clearing past dues. “Air India has committed to a new payment mechanism of bill of exchange. Under this mechanism, the bank will give a limit to Air India and OMCs will get immediate payment and then Air India will later make payment to the bank with interest. In this manner, they have said that they will reduce the outstanding dues,” the source said.

Why did OMCs threaten to cut ATF supply?

Air India owes over Rs 5,000 crores to three state-run refiners — Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited (BPCL). After the three refiners snapped fuel supply in September, the national carrier had agreed to pay for day-to-day fuel purchases on a daily basis and Rs 100 crores every month towards clearing the past accumulated dues.

However, it has failed to do so, prompting the three OMCs to issue a notice. In the October 18 letter, OMCs had warned Air India that jet fuel supply will be snapped from November 1 without any notice if it fails to make payments towards clearing past dues.

(PSU Watch- India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)