Flights to resume as oil companies arrive at settlement
Sweta Ranjan | May 27, 2011
Tough times for Air India do not seem to be ending. After the pilots’ strike last month, the national carrier is facing a bigger embarrassment. On Friday, a total of 15 flights had to be cancelled and more cancellations are expected. The reason: it has no fuel, because it has not paid dues to public-sector oil marketing companies, which won’t give it aviation turbine fuel (ATF) anymore without ready cash. However, by Friday afternoon the firms agreed for a settlement and the flights were likely to normalise soon.
On Friday morning, five flights from Chennai (including one international), five flights from Kerela (including one international), three flights from Mumbai and two flights from Delhi were cancelled, an Air India spokesperson confirmed. Hyderabad sector was also affected.
The mismanagement of Air India and the murder of Maharaja: Read more in the current issue of Governance Now
Indian Oil Corporation, Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation left the national carrier stranded because of non-payment of dues of Rs 1,300 crore, sources told Governance Now, though officials were tight-lipped and refused to divulge the reason behind flight cancellations.
This oil companies’ move could have had a large-scale impact as fresh reports of flight cancellations are coming in from across India. According to the sources, the problem was expected to spread further to other centres and keeping Air India airborne can be a difficult task for the government.
The sources said AI might have to temporarily cancel some more flights due to the pressure from the oil companies to pay up the dues. The cash-starved national carrier has a payment overdue of Rs 3,320 crore to oil companies and other vendors.
A source requesting for anonymity, says, “Air India’s daily ATF bill is up to Rs 18.5 crore and it has dues of about Rs 2,400 crore. Due to high dues AI's credit facility was withdrawn and it was put on cash-and-carry last December. But AI has failed to clear its dues."
“The national carrier has an outstanding unsecured short term working capital loan of Rs 20,763 crore and an annual interest burden of Rs 2,400 crore, at the rate of 12 to 14 percent, which is quite high," the source said.
After putting AI in the cash-and-carry mode, oil marketing PSUs had threatened that they would not provide fuel if their daily bills were not cleared.
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