Around 60 per cent of the gross budgetary support demand of Rs 1,978 crore (Rs 19.78 billion) made by the civil aviation ministry for 2010-11 is for equity infusion into Air India.
The demand is double the budgetary support to the ministry in the Budget of 2009, when it got Rs 190 crore (Rs 1.9 billion), plus an infusion of Rs 800 crore (Rs 8 billion) in AI, for which approval was taken from Parliament.
Out of the money demanded by the ministry, Rs 1,200 crore (Rs 12 billion) is for equity infusion into AI, which needs cash to survive and fund its losses of Rs 7,000 crore (Rs 70 billion). Another Rs 550 crore (Rs 5.5 billion) is to be invested in building airports in northeastern states and Jammu & Kashmir.
"We hope our demand will be met this time as Rs 1,200 crore (Rs 12 billion) will be used for equity infusion into Air India and the rest in building airports in the northeast and Jammu & Kashmir," said a source in the ministry. "Air India is in dire need of money and badly needs equity infusion."
AI has accumulated losses of over Rs 7,000 crore on an equity base of only Rs 145 crore (Rs 1.45 billion) and needs government funds to meet its working capital needs. A group of ministers (GoM) headed by Finance Minister Pranab Mukherjee is monitoring the airline on a monthly basis.
The GoM has provided financial support of Rs 800 crore (Rs 8 billion) but has also asked the airline to save Rs 2,000 crore (Rs 20 billion) by generating additional revenue and cutting costs till March.
The ministry has not been able to spend its total allotment since 2007-08. In 2007-08, it got Rs 200 crore (Rs 2 billion) as budgetary support but could spend only Rs 152 crore (Rs 1.52 billion). The following year, it received Rs 190 crore (RS 1.9 billion) but could spend only Rs 170 crore (Rs 1.7 billion). It has received Rs 190 crore for the current year.
Civil Aviation Minister Praful Patel held a review meeting with AI and senior ministry officials.
The AI board is also meeting on Friday to decide on a proposed 15 per cent pay cut; if implemented, it would save Rs 400 crore in the coming financial year. Pay is the second largest component of the company's operating cost after the fuel bill. AI's annual wage bill for 31,500 employees is Rs 3,100 crore (Rs 31 billion).
