The Hindu Business Line : `Guarantee fee levy on Indian, AI dues not proper'

The Public Accounts Committee of Parliament has expressed the view that the levy of guarantee fee at a flat rate of 1.2 per cent per annum on the outstanding amounts of loans borrowed by Indian and Air India irrespective of stipulations made in the original sanctions issued by the Ministry of Finance at the time of extension of guarantees was not proper.

"It would not be appropriate on the part of the Ministry of Finance to insist on payments of guarantee fees at penal rates as guarantee fee at the normal rates have already been paid by both PSUs," the Committee has said in the latest report tabled in Parliament on Monday.

The Government guarantees issued to both the airlines in the pre-1993 period in connection with the external commercial borrowings did not carry any stipulations for payments of a guarantee fee.

However, in 1993, the Ministry of Finance issued instructions for charging a guarantee fee at a flat rate of 1.2 per cent a year on the outstanding amount of the principal plus interest in respect of the external borrowing. The instructions stated that the guarantee fee was to be levied in respect of guarantee already issued but still partially outstanding. The two airlines, however, did not accept the stipulation of the Ministry of Finance.

The Committee has expressed surprise over the fact that the matter regarding payment of guarantee fee has been lingering on for 12 and both parties were unable to arrive at a consensus.

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