Relief for Air India: OMCs defer decision to suspend fuel supplies after national carrier promises to clear dues

  • The three state-owned oil companies - Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) - had earlier this month threatened to snap aviation turbine fuel (ATF) supplies to Air India at six major airports over payment delays

  • Officials said the decision to defer the move follows Air India making a written request for the same as also promising to make regular payments to clear over Rs 5,000 crore in overdue fuel bills

New Delhi: State-owned oil companies on Friday decided to defer snapping fuel supplies to Air India after the national carrier promised to adhere to the schedule of clearing past outstanding dues, officials said.

Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) had on 5 October written to Air India that they will stop supplying aviation turbine fuel (ATF) to its aircraft at six major airports from 18 October if it didn't honour its payment commitments.

 Relief for Air India: OMCs defer decision to suspend fuel supplies after national carrier promises to clear dues

Representational image. Reuters

"It (Air India) has made a request not to stop supplies and promised to make regular payments. In view of their commitment, we have decided to defer the decision to terminate supplies," an official at one of the fuel retailers said.

Air India owes the three firms over Rs 5,000 crore in past fuel bills and had first in June and again in September agreed to pay this amount in monthly installments of Rs 100 crore. But Air India failed to honour its commitment, leading to the 5 October notice.

IOC Director (Finance) Sandeep Kumar Gupta had earlier this week stated that the Rs 100 crore monthly payment was beside the airline being put on cash-and-carry where it was given fuel only against cash payment.

Air India owes IOC about Rs 2,700 crore in unpaid fuel bills. This includes Rs 450 crore of interest. It's outstanding towards the three oil firms is about Rs 5,000 crore including interest.

Air India buys about Rs 25-26 crore worth of fuel every day from the three oil companies.

On 22 August, IOC, BPCL and HPCL had stopped fuel supplies to Air India at six airports of Kochi, Mohali, Pune, Patna, Ranchi and Vizag over payment defaults. The supplies were resumed on 7 September after the intervention of the Ministry of Civil Aviation.

On 5 October, the oil companies had told Air India that if it did not make the monthly lump sum payment, they will stop fuel supply from 11 October at "six major domestic airports". Subsequently, Air India wrote to them requesting not to stop the fuel supply.

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Updated Date: Oct 18, 2019 14:27:56 IST