Air India seeks govt nod for borrowing funds to meet working capital requirements

AI is believed to have made a request for the same at a meeting on May 14 that was attended by all the top bosses of agencies working under MoCA

New Delhi: Air India (AI), which is set to be disinvested, has sought the government's permission to borrow Rs 2,400 crore from National Small Savings Fund (NSSF), a pool of small savings from households, to meet its working capital requirements. The national carrier is believed to have made a request for the same at a meeting on May 14 that was attended by all the top bosses of agencies working under the Civil Aviation Ministry. The meeting was chaired by Secretary and former AI CMD Pradeep Singh Kharola.

At the meeting, Singh is believed to have told the airline to discuss its financial issues separately. The total debt on the airline has ballooned to Rs 58,000 crore.

'This is fresh requirement'

An Air India official aware of the development said, "This is a fresh requirement beyond what had been approved earlier." The official also said that the government was supposed to infuse Rs 2,484 crore in order to support Air India.

Govt guarantee or loan?

The source also said, "This could be provided as a Government of India (GoI) guarantee or in the form of a loan. If it gives us a guarantee, we can borrow from the bank. In case the support comes as a loan, the interest would be directly paid to the government. The NSSF loan is like borrowing from the government and it is about 0.5 per cent cheaper compared to commercial banks."

The airline's demand for loans indicates its precarious financial health.

Disinvestment would be done in next few months

According to sources, the disinvestment of Air India is one of the unfinished business of the Narendra Modi government, which is likely to get the matter off its plate in the next few months. "Going at the current pace, the EoI (expression of interest) for the sale of Air India will soon be out. Disinvestment of the airline is now a matter of months," a government official said.

AI puts expansion plans on hold

In the meanwhile, the airline has decided to put its expansion plan because of disinvestment. It has decided to not take any new aircraft on lease or expand its network by making more grounded aircraft operational.

Air India is currently dependant on a Rs 30,000 crore bailout plan cleared by the UPA-II government in 2012.