The Government may ask private airlines to present a viable business plan, so that they could extend a helping to cash-strapped and financially distressed operators.

The Government is said to be considering a slew of measures including allowing airlines to import aviation turbine fuel (ATF or jet fuel) and asking banks to provide credit on easier terms. A core group of secretaries, constituted after instructions from the Prime Minister, reviewed the present situation of the airline industry on Wednesday.

The move comes in the backdrop of five of the six private airlines approaching the Government for help in the last six-eight weeks. The help is likely to come with strings attached. Airlines could be asked to show what steps they are taking to improve fares, cut excess capacity and draw up a plan to ensure that loans, if made available, are secured. While the group is headed by the Civil Aviation Secretary, the Petroleum and Financial Services Secretaries are other key members.

Regarding jet fuel, official sources said that airlines could be given permission to import jet fuel subject to limit on quantity and infrastructure availability.

At present, rules say that jet fuel can be imported only by state trading enterprises or by those companies that have been granted rights for marketing of fuels by the Petroleum Ministry. In case direct import licence is granted, that can be done only through Indian Oil.

The present rule can be relaxed as a special case under clause 2.5 of the trade policy. According to the clause, the Directorate-General of Foreign Trade (DGFT) may pass such orders or grant such relaxation or relief, as it may deem fit and proper, on grounds of genuine hardship and adverse impact on trade. Earlier, Kingfisher had requested the DGFT for allowing it to import aviation fuel directly. The debate then was whether just one airline should be permitted or all should be allowed. Official sources said, change, if any, will apply to all the airlines. Airlines can save money by paying price excluding duties on crude, refinery and company's margin.

On the other hand, there is a feeling that airlines are charging 15-20 per cent less than the cost of operation. “Which business can run like this? First they added capacity causing demand-supply mismatch, then reduced the fare to face competition,” a person familiar with the development told Business Line .

“The core group will mainly dwell upon regulatory issues. Considering the gravity of the situation, the committee will prepare its final report as early as possible and forward for final action,” he added.

> Shishir.s@thehindu.co.in

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