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Air India’s debt to oil firms close to Rs 4,500 crore

Air India owes three state-owned oil firms close to Rs 4,500 crore in unpaid fuel bills with payments being delayed by almost seven months forcing retailers to snap supplies, according to senior.  Last week Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) stopped jet fuel or ATF supplies to Air India at six airports- Kochi, Pune, Patna, Ranchi, Vizag and Mohali, over payment defaults.

“Air India has a 90 day credit period, which means they have to make payment for fuel they buy today by November 21. But Air India had not been making payments and the credit period is now over 200 days,” a senior official at one of the three state-owned oil firms said. Total unpaid dues to three fuel retailers stand at close to Rs 4,500 crore. “The airline offered to pay Rs 60 crore which is a drop in the ocean of what they owe,” another official at one of the fuel retailers said.

IOC, BPCL and HPCL more than a week back jointly wrote to Air India seeking expeditious clearance of the dues, failing which they will be constrained to take action. However the government owned airline failed to provide a clear roadmap to clear dues, forcing oil companies to stop supplies. Another official said that, Air India gets financial support from the government while for oil firms there is no such help.

“Aviation Turbine Fuel (ATF) pricing was deregulated in April 2002. And since then we have to run this business without any subsidy support from the government,” he said.

At present, the government only provides some subsidy on LPG to help roll out its ambitious Ujjwala scheme of providing free cooking gas connections to poor. There is also a subsidy on kerosene supplied through the public distribution system (PDS). A senior Air India official disclosed that oil firms stopped fuel supplies to the airline at Cochin, Visakhapatnam, Mohali, Ranchi, Pune and Patna around 4 pm.

Air India spokesperson stated that “in the absence of equity support we cannot handle the huge debt service liabilities”. “Our financial performance, however, this fiscal is very good and we are moving towards a healthy operating profit. The airline despite its legacy issues is performing very well,” he added. Air India has total debt of over Rs 58,000 crore, of which debt to oil companies is about seven per cent to the collective outstanding.

HT Media

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