Ministry rejects proposal to extend credit period on fuel bills

NEW DELHI: Air India���s flight to safety has hit an air pocket, with the petroleum ministry rejecting a proposal to extend its six-month credit period on fuel bills.

The ministry has instead told National Aviation Company of India (Nacil), which operates Air India, to negotiate the terms directly with oil companies, a government official said. It told Nacil that the oil companies are autonomous and the business terms are decided by them, said the official, requesting anonymity.

Air India, sitting on accumulated losses of Rs 7,200 crore, already owed Rs 542 crore to oil companies as on March.

The civil aviation ministry will now take the issue to the committee of secretaries (CoS), set up to review Air India���s progress in addressing the worst financial crisis in its 60-year existence, on July 25.

The committee is headed by the Cabinet secretary and includes the PM���s principal secretary as well as finance and civil aviation secretaries.

The development will impact the financial restructuring of Air India as fuel accounts for 40% of its operating cost. It also threatens to undo the goods of the negotiations Nacil recently had with the government and its suppliers of goods and services.

The suppliers have already extended a 180-day credit period to the airline. Earlier, these bills had to be settled within a fortnight.

The government has also issued a circular mandating all its employees entitled for air travel to fly only Air India. The airline now plans to set up booking offices in government buildings, in a move estimated to fetch it an annual business of Rs 2,000 crore, an aviation ministry official said.

Air India would give a presentation to the CoS on the proposed cost-cutting and revenue-enhancing measures at its meeting on July 25, another official said.

The airline is expected to send a final bailout proposal to the Cabinet by August-end.