Aviation Min asks DIAL to cut interest on AI dues

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SummaryThe civil aviation ministry is trying to reap benefits for Air India from the ongoing dispute between the Airports Authority of India

The civil aviation ministry is trying to reap benefits for Air India from the ongoing dispute between the Airports Authority of India (AAI) and the Delhi International Airport Ltd or DIAL over revenue sharing.

The ministry has suggested that DIAL (consortium that runs the Delhi airport) bring down the interest rate charged on Air India’s dues to a rate it pays to its borrowings. But people in the know say that it is easier said than done.

The dispute started with DIAL not sharing the interest charged on Air India’s dues with AAI on the ground that they have borrowed the same amount from banks to fund their working capital requirements. An agreement between AAI and DIAL says the latter is to share 45.66 per cent of its total revenues with AAI and interest on dues is considered as revenues. The state-owned airport operator had reported the matter to an oversight committee — the OMDA Implementation Oversight Committee.

In a meeting in November, the committee suggested that the interest on AI’s dues should only be a pass through and not be more than the interest on borrowings. All other airport operators will also have to ensure that interest on dues should be in proportionate to interest on borrowings.

“DIAL is charging an interest of 12 per cent on Air India dues, whereas, the interest rate on their borrowings are around 9.5 per cent. We have asked them to bring the interest rate charged on AI’s dues in proportionate to the interest on their borrowings. They have to come back to the committee,” said a senior civil aviation ministry official.

This relaxation may give bring some financial respite for the national carrier, as the interest rate burden on around Rs 600 crore dues to Delhi Airport will go down by 2.5 percentage points. Air India, which owes around Rs 3,000 crore to various airport operators and of Rs 1,500 crore of the dues is owed to Airports Authority of India.

A query send to DIAL did not elicit any response.

However, sources said one cannot have special rules only for Air India and all other airlines will also ask for it. “DIAL not sharing revenues is completely against the principles of the contract. Bringing down the interest rate on dues to AI is not possible. So, all these suggestions will not address the problem,” said a source.

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