Finance ministry may not infuse any additional funds into Air India this financial year; Rs 2,600 cr to be used to pay off interest

In a major setback for Air India, the finance ministry is unlikely to infuse any additional funds into the debt-laden airline this financial year amid a report that the government may come out with a fresh disinvestment plan for the national carrier, said a media report.

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According to a report by CNN News18, Rs 2,600 crore will be utilised to pay off the interest on bonds raised by Air India Assets Holdings Ltd (AIAHL).

A specific alternate mechanism will decide if the remaining debt of Air India is going to be transferred into a special purpose vehicle will be created to transfer the debt, said the report.

AIAHL is expected to come out with its second bond offering worth Rs 15,000 crore in the next 10 to 12 days, reported PTI.

Representational image. Reuters

AIAHL — the special purpose vehicle of Air India — mopped up Rs 7,000 crore through bonds on Monday and the issue was oversubscribed more than 20 times.

A total of Rs 22,000 crore is to be raised by sale of bonds by AIAHL and the proceeds would be used to repay the national carrier's debt, which is estimated to be over Rs 58,000 crore.

The official said AIAHL would issue bonds, guaranteed by the government, to the tune of Rs 15,000 crore in September.

The bonds, having a ten-year tenure, are expected to be issued in the next 10-12 days. State-owned LIC and EPFO are likely to be among the bidders, the official added.

Meanwhile, in a bid to woo bidders for the debt-ridden national carrier, the government is expected to ease the burden of working capital debt off the buyer.

Air India has a debt burden of more than Rs 50,000 crore. The new disinvestment proposal plan is likely to be discussed at the next Cabinet meeting, a report said.

Last month, Union Minister for Civil Aviation Hardeep Singh said the government was determined to privatise Air India. The government should not be in the business of running an airline, he said adding the private sector should run airlines instead, he said.

The government is determined to get Air India's privatisation process started and to get the best possibel deal ina time-bound manner, Singh said.

The government had injected Rs 3,975 crore into the airline in the fiscal year that ended 31 March and hived off some debt and the Ministry of Civil Aviation said that the carrier was ready for sale.

— With inputs from agencies