NEW DELHI: The finance ministry's decision to hold back unconditional government guarantee for Air India's Rs 7,400-crore bond issue may push up the national carrier's restructuring plan beyond the Rs 30,000-crore cleared by the Cabinet six months ago.
Sources said that even civil aviation minister Ajit Singh's fervent pitch to finance minister P Chidambaram for a guarantee without any conditions has failed to move North Block. The sources said that after the meeting, Singh told his officers that the finance ministry had agreed to his plea but there has been little movement beyond that.
Already, the bond issue - meant to be subscribed to by long-term investors such as Life Insurance Corporation and the Employees Provident Fund Organization - has been deferred and with only a conditional cover in hand, the Air India management is yet to fix a fresh date.
On September 24, TOI was the first to report that the conditional guarantee will only be available if the airline meets the specified parameters. Bankers as well as the AI management have questioned the rationale for a virtually unprecedented move, saying that if the parameters are met, the airline's financial health would be sound and in that situation the chances of a default are minimal.
The bond issue, cleared by the Cabinet in April, is meant to retire high-cost debt on the books of the public sector airline, which is saddled with losses. An Air India executive, who did not wish to be identified, said that the national carrier's cost of servicing debt remained high as it was unable to complete the plan to replace loans that were taken at a high cost.
A senior executive, however, added that the additional burden would not be significant, although some estimates within the government put the additional liability at Rs 2,000-3,000 crore. "There was no date for the bond issue that was mentioned in the Cabinet note. So, the cost will not go up significantly," said the senior AI executive on the condition of anonymity.
The Rs 30,000-crore financial restructuring cleared by the Cabinet is expected to put the beleaguered carrier back on track, given the Rs 20,000-crore losses and debt of Rs 43,000 crore.
Apart from the bonds, the government had to pump in additional equity and take over loans taken for aircraft acquisition, which were then estimated at close to Rs 19,000 crore. But even these two elements of the plan are yet to be completed.
Source: http://timesofindia.feedsportal.com/fy/8at2Etb0f7c8X3Hb/story01.htm
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