IOC encashes Rs 50 cr bank guarantee

Indian Oil Corporation has encashed a Rs 50-crore (Rs 500-million) bank guarantee after a cheque issued by Kingfisher Airlines towards fuel dues bounced.

IOC encashed the bank guarantee Kingfisher had given for buying aviation turbine fuel for its fleet of 75 aircraft, 10 days ago, industry sources said.

As on April 20, the private air-carrier owed IOC about Rs 160 crore (Rs 1.6 billion) in fuel bills. It sent a cheque of this amount to IOC but the cheque bounced, forcing IOC to encash the bank guarantee.

Besides IOC, Kingfisher owes Hindustan Petroleum Corporation Limited -- its largest ATF supplier -- Rs 336 crore (Rs 3.36 billion) and Bharat Petroleum Corporation Limited another Rs 290 crore (Rs 2.9 billion).

A Kingfisher spokesperson said: "It is not Kingfisher Airlines' policy to discuss its relationships with suppliers in the public domain. . . Kingfisher Airlines is operating its full schedule of flights daily."

Industry sources said the company had put Kingfisher on cash-and-carry about 2-3 month ago after the airline failed to honour its commitment of making timely payments for past fuel dues as had been agreed last year.

Both IOC and BPCL have stopped credit to Kingfisher and are asking the airline to make payments for every refueling. HPCL, however, continues to give some credit to the airline.

They said Jet Airways, the other private carrier, which was part of the bailout package, has been clearing its dues regularly. Its outstanding to IOC was just Rs 30 crore (Rs 300 million) and it owed another Rs 80 crore (Rs 800 million) to BPCL.