Cash crunch due to a high fiscal deficit has held back infusion of equity of over Rs 3,574 crore in Air India, which may now be forced to raise money from the market, official sources said today.
Equity infusion “could be delayed but not denied”, the sources said, adding that in the meantime, Air India could contemplate taking loans from the market to meet its immediate requirements.
Air India was also considering sale of land, including the one near Connaught Place in Delhi which was estimated to be worth Rs 700 crore, the sources said.
The Finance Ministry has decided to put on hold the equity infusion on grounds of lack of funds due to the high fiscal deficit and the falling rupee, they said.
The amount is actually due from the previous fiscal as the government had then infused only Rs 5,000 crore instead of Rs 8,574 crore as planned earlier.
The government had earlier been rapped by a parliamentary panel for not infusing equity in a timely manner in the last financial year.
“Any delay or shortfall in the infusion of equity would adversely affect the implementation of the Turnaround Plan and Financial Restructuring Plan (FRP),” apart from denting the airline’s profitability, the Standing Committee on Transport, Tourism and Culture had said in its report in May.
It had then said that the shortfall would compel Air India to “to borrow short—term loans from banks in order to bridge the equity gap ..., which may adversely affect the profitability of the company.
“In fact, one of the conditions under which the regulator (RBI) and the consortium of banks supported the FRP entails timely equity support to Air India by the government.”
The panel, headed by senior CPI(M) leader Sitaram Yechury, had strongly recommended that the government “should provide the promised equity infusion which has been accumulated, without any interruption during the course of the financial year.”