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Cabinet to decide on Air India's future: Minister

February 22, 2010 19:23 IST

Air India logoThe government would take a call on the future of ailing Air India, which plans to raise its working capital by Rs 1,000 crore (Rs 10 billion) in the near future.

"We will put the whole picture before the Cabinet," civil aviation minister Praful Patel told reporters in New Delhi when asked what decisions the government was contemplating on the cash-strapped airline.

Last week, the government approved an equity infusion of Rs 800 crore (Rs 8 billion) for the national carrier, following which the airline decided to raise its working capital from Rs 17,000 crore (Rs 170 billion) to Rs 18,000 crore (Rs 180 billion).

A decision to this effect was taken at a board meeting of the National Aviation Company of India Limited, which runs the national carrier, on Saturday.

The move would help the airline to raise resources from the market to fund its fleet acquisition as well as other operational costs.

Highly-placed sources had earlier said the government should prepare a clear roadmap for the future of the loss-making airline in the wake of its huge losses and heightened competition.

As part of its cost-cutting measures, NACIL has been taking a series of measures, including launching negotiations with several state-run banks to avail loans of about Rs 1,500-2,000 crore (Rs 15-20 billion) on its working capital and convert its high-cost debt into low-cost.

The cash-strapped carrier already has over Rs 16,000 crore (Rs 160 billion) working capital borrowings on its balance sheet, coupled with around Rs 7,200 crore (Rs 72 billion) expected losses last fiscal. Its borrowings have risen steeply from Rs 6,550 crore (Rs 65.5 billion) in November 2007 to Rs 15,241 crore (Rs 152.41 billion) in June 2009.
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