Aviation Min for conversion of Rs 4,000-cr govt equity in AI to grant

The aviation ministry on March 25 sought finance approval for treating “a part of the equity support” approved under April 2012 Turnaround and a Financial Restructuring Plan as “grant”. Sources said the demanded amount was about Rs 4,300 crore.

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The grant would make AI operationally profitable in fiscal 2015-16 itself. The return to profitability is being highlighted as the key driver as it is expected to cut its net loss by about a third to Rs 3,500 crore in that year.

The aviation ministry’s plea follows a tepid response by the finance ministry in Budget 2015-16 where AI was provided only Rs 2,500 crore as equity — half of expected.

The rationale for the grant is the airline’s continued connectivity to under-served loss-making regions of the country. And, it says, if the grant was not made available, AI — which already pays about Rs 4,000 crore as loan and Rs 3,800 crore as interest annually —would have to resort to further borrowing to bridge the equity gap.

The Prime Minister’s Office is also keen on turning around the national carrier and has asked AI to furnish details of its business plan, cash position and dependence on government fund.

AI has failed to make any profit since its merger with erstwhile Indian Airlines in 2007 and has been surviving on government bailouts. It has a fleet of 125 aircraft, flies to 38 international and 66 domestic destinations.