Budget 2012: ECBs in aviation welcome, says Vijay Mallya

NEW DELHI: Beleaguered air-carrier Kingfisher Airlines today welcomed the Budget proposal to allow aviation companies to raise capital through external borrowings worth $1 billion during the next fiscal.

" External Commercial Borrowings for working capital are very welcome. Interest rates and hedging costs will be much less than Indian rupee denominated costs," Kingfisher Airlines Chairman Vijay Mallya said here.

Introducing the 2012-13 Budget, Finance Minister Pranab Mukherjee acknowledged that the airline industry was facing a financial crisis and the high operating costs of the sector was "largely attributable" to the jet fuel cost.

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Mukherjee also said that a proposal to allow foreign airlines to participate up to 49 per cent equity in an airline company, which is operating scheduled or non-scheduled services, was under active consideration of the government.

"Permitting foreign airlines to invest up to 49 per cent as and when implemented will be very welcome ... direct import of fuel was earlier announced, but now confirmed, will greatly reduce net fuel cost," Mallya said reacting to the Budget announcements.

Kingfisher Airlines has a debt of Rs 7,057.08 crore and the financial crunch has hit its operations with dozens of flights being cancelled regularly.

Tax authorities have also frozen the bank accounts of the struggling airline for non-payment of dues. The airline has for long been asking the government to allow FDI for foreign airlines.