The Board for Reconstruction of Public Sector Enterprises (BRPSE) has decided to examine the performance of ailing National Aviation Company of India Ltd (Nacil), which has sought a bailout package of more than Rs 4,000 crore from the Centre, to ascertain its future profitability.
?In our last meeting on January 9, we have decided to undertake a suo motu examination of the books of Air India (formally known as Nacil) to see why are they losing market share frequently and what are they doing to correct the situation,? BRPSE chairman Nitish Sengupta said on Monday.
?We have written to the ministry of civil aviation regarding our decision and sought their comments. The response is awaited,? Sengupta said. During the examination, BRPSE would assess the financial performance of the company in the last year and the budgetary support it received from the Centre.
?The company was formed by joining two ailing companies. Now the new firm should be able to stand on its own and should get less budgetary support,? said a senior official of the department of public enterprises in the ministry of heavy industry and public enterprises, on the condition of anonymity.
The company was formed in August 2007 after the merger of loss-making national carriers Air India and Indian, said to create a substantial value for both the airlines. Air India incurred a net loss of Rs 447.9 crore in 2006-07 and Indian recorded Rs 240.3 crore as losses during the financial year.
The merger was also expected to increase the net worth of the two airlines by 14 times to Rs 2,557.49 crore from Rs 185.29 crore, merger consultant Accenture had said in early 2007. The asset valuation was also projected to grow significantly from Rs 4,804 crore to Rs 7,176.30 crore. The company has accumulated losses of Rs 2,200 crore, mainly due to high fuel prices, old fleet, post-merger problems and overcapacity. The entity has also borrowed nearly Rs 8,550 crore.
In 2008, the company had sought a bailout package of Rs 1,300 crore for meeting its working capital needs and Rs 1,000 crore as soft loan. As global fuel prices went up and air traffic slid, the company started losing Rs 13-14 crore daily. This led to an increase in total demand to more than Rs 4,000 crore.
However, the civil aviation ministry last moved a draft Cabinet note for comments from various ministries for giving Rs 2,500 crore to Nacil. The process has, since then, not progressed and the company is yet to receive the sum.