Government Allocates Rs 1,800 crore as Budgetary Support to Air India

MUMBAI: The government has put aside Rs 1,800 crore as budgetary allocation for Air India for the financial year 2017-18, less than what the national carrier asked for, in an indication the government continues its squeeze on fund handouts to the loss-making carrier.

In the last financial year, the government had allocated Rs 1,713 crore while the carrier had asked for a total of Rs 3,300 crore. In the supplementary grants, the government allotted Rs 752 crore more making it a total of Rs 2,465 crore.

A reduction in fuel prices and its own cost cutting measures has helped Air India reduce losses but it still accounts for the biggest chunk in the industry. In FY16, the airline posted a net loss of Rs 3,837 crore as compared to Rs 5,859 crore in the previous year.

The bigger bother for the carrier however is its Rs 46,000 crore debt. Lohani had in a recent interview with ET said the government's squeeze of financial support will lead to further pile-up of loans.

"The government is giving us support to the extent of servicing loans raised for the procurement of planes as desired by it. It is always the owner who pays for the capital invested. These funds don’t even fully cover the loan repayments. These are not subsidies," he said.

"What will happen is that the money I owe to other organisations, including banks, will rise. We have to meet our costs: either by borrowing from banks, or delaying payments. That has been happening for several years,"he added.