The meeting was also apprised of the recent decision to allow foreign airlines pick up 49 per cent stake in Indian carriers.
In major steps to bolster the beleaguered aviation sector, a Group of Ministers on Tuesday recommended direct import of jet fuel by airlines to help them save on high taxes and allow Air India to raise Rs7,400 crore by issuing government-guaranteed bonds or other means.
These recommendations of the GoM, headed by Finance Minister Pranab Mukherjee, would be taken up for approval by the Union Cabinet and the Cabinet Committee on Economic Affairs respectively soon, Civil Aviation Minister Ajit Singh told reporters after the 90-minute meeting in Delhi.
The meeting was also apprised of the recent decision to allow foreign airlines pick up 49 per cent stake in Indian carriers. A note on the issue would be prepared soon for the Union Cabinet to give its nod, he said.
On Air India, the GoM recommended, among other steps, issuance of bonds with sovereign guarantee worth Rs7,400 crore, Singh said.
The bond is likely to carry a coupon rate of 8.5-9 per cent and financial institutions may subscribe to these bonds, official sources said, adding this would be part of the national carrier's financial restructuring plan which was also approved by the GoM today.
"First thing is that on Air India's financial restructuring GoM has taken a view. Bonds will be issued, but this will have to go to the Cabinet. Bonds, and there are other ways," the Minister said, adding that about Rs7,400 crore would be raised through these means.
On ATF imports, Singh said airline "companies will be allowed to import fuel directly for their use. This also has to go to the Cabinet. GoM has approved this. We will try to see whether some kind of credit arrangement can be made."
The decision on jet fuel would help airlines significantly as it accounts for more than 40 per cent of their operating costs. To allow direct import of jet fuel by the airlines, the item has to be removed from the list of those imported through government channels.
Sales tax imposed by states on jet fuel varies between four to 30 per cent. In the last fiscal, Indian oil companies had sold 5.08 million tonnes of jet fuel, an increase of 9.7 per cent over 2009-10.
However, the delivery of ATF right up to the aircraft has to be done through the state-owned refiners which currently have the airport infrastructure required for the purpose.
Singh said these details would be worked out in due course.
Tuesday's meeting, earlier slated for Thursday, was also attended by Home Minister P Chidambaram, Petroleum Minister S Jaipal Reddy, Commerce Minister Anand Sharma and Planning Commission Deputy Chairman Montek Singh Ahluwalia, apart from top officials.
To questions on allowing foreign airlines to buy equity in Indian carriers, the Civil Aviation Minister said the issue, on which a decision was taken earlier, did not come up before the GoM.
"FDI (by foreign carriers) did not come before the GoM. I met Finance Minister (Jan 17). We are moving a note. Then it will be moved to the Cabinet. It is basically for allowing 49% FDI by foreign airlines. I expect this note to be sent soon," Singh said.
Asked about government infusing additional equity of about Rs6,600 crore in Air India, official sources said this would also be done. Allowing the ailing national carrier to raise funds through government-guaranteed bonds or other means was "over and above equity infusion decision", they said.
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