Petro min favours fund infusion with a rider

The petroleum ministry has favoured a proposal seeking Rs 1,200 crore fund infusion in state-owned Air India with the rider that the airline should clear the dues of public sector oil marketing companies. The development comes at a time when finance and home ministries have expressed their unwillingness to offer further financial support to the carrier in absence of its ability to cut cost and increase revenue as directed by a ministerial panel headed by Pranab Mukherjee.

?The petroleum ministry has positively commented on the note which seeks Rs 1,200 crore for the airline but with the condition that the dues of oil companies be paid off with the fresh government fund,? an official in the civil aviation ministry said.

An Air India official said that the airline owed about Rs 1,800 crore to oil companies.

The civil aviation ministry had last month circulated a Cabinet note to various ministries asking for their comments on Rs 1,200 crore equity infusion to Air India. The Cabinet Committee on Economic Affairs (CCEA) is expected to take up the proposal by the end of this month.

?Some ministries have not supported our proposal since Air India has not met part of the cost-cutting targets set by a group of ministers (GoM) headed by finance minister Pranab Mukherjee. We are though hopeful of the CCEA clearing the proposal,? the official said.

The Planning Commission is, however yet to give its comment on the proposed fund infusion plan of civil aviation ministry.

?The Planning Commission has asked the airline to give its turnaround plan. The commission has said it would offer its comment only after the turnaround plan is presented to it,? the official said.

Air India has already submitted a revival plan to the GoM and is working on strategies to become profitable. The airline has in the first six months of the fiscal reduced its operating losses to Rs 976 crore as against Rs 2,216 crore in the April-September period last year.

It has stopped operation on various sectors which were accruing heavy losses to its balance sheet.