National carrier Air India will soon raise US dollar 300 million through the external commercial borrowing route, with the central government providing guarantee for the loan.
The debt-laden airline would mainly utilise the proceeds for maintenance of aircraft and working capital requirements, among others.
This is the first time Air India is raising funds through the ECB route.
Air India will raise USD 300 million (about Rs 1,900 crore) by way of ECB and the government will provide guarantee for the loan, a senior Civil Aviation Ministry official said today.
Approvals for extending sovereign guarantee for the loan are in place and the ministry is expected to issue papers in this regard to Air India tomorrow, the official added.
The proposal has received approvals from finance and law ministries.
According to the official, Air India has already held discussions with lenders and the tenure of the loan would be around 3-6 years.
The fund raising by Air India will come under the overall USD 1 billion ECB ceiling for the civil aviation sector. The maximum permissible ECB that can be availed by an individual airline company is USD 300 million.
Already, Jet Airways and Go Air have raised funds through the ECB route in recent times. Together, they have mopped up about USD 350 million, the official said.
The Reserve Bank of India has extended the ECB window for airlines by one year till March 2016.
ECB proceeds can be used for working capital and refinancing of the outstanding working capital rupee loan availed from the domestic banking system, among others.
Air India, which is in the red, has a debt burden of around Rs 40,000 crore and is surviving on a bailout package approved in 2012.
The UPA government had in April 2012 approved Air India’s turnaround plan, with a committed public funding of Rs 30,231 crore, staggered over a period of nine years, with some specific riders.
Meanwhile, the Civil Aviation Ministry is pitching for additional funds for Air India, which was allocated Rs 2,500 crore in the Union Budget 2015-16. The amount was well short of nearly Rs 4,300 crore sought by the ministry for the national carrier.
The ministry wants to make up for the shortfall of Rs 1,800 crore through supplementary demand for grants.