The civil aviation ministry is set to pitch for a Rs 42,000 crore bailout for Air India. The ministry, which is being blamed for turning the Maharaja sick due to a merger of Indian Airlines and Air India, is going to tell the group of ministers next week that the national carrier will need Rs 42,000 crore over the next eight to nine years and over 130 more planes on lease.
And, in suggesting the requirements, the ministry seems to have simply lifted the recommendations of SBI Caps without putting much thought to the overall implications. Even if the funding is spread over nine years, the government would need to earmark nearly Rs 5,000 crore annually to Air India, which has already received several bailouts in addition to guarantees to fund its fleet expansion plan. Besides, the airline is seeking fresh guarantee to get a loan restructuring from banks.
Air India's fund requirement is significantly higher than the mega bailouts provided to financial institutions such as UTI, IDBI and IFCI a decade ago, where retail investors' funds were involved. In recent years, the government has provided equity support to public sector banks to ensure that it retains over 51% stake. Since 2008, the government has provided over Rs 30,000 crore for this.
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