National Aviation Company’s (Nacil) proposal for equity and soft loan from the central government appears to be stuck.
National Aviation Company’s (Nacil) proposal for equity and soft loan from the central government appears to be stuck.
The national air carrier had sought an equity induction of Rs 1,231 crore and soft loan of Rs 2,750 crore to meet its working capital requirements. But according to top sources, the Union finance ministry has put several riders to such a proposal and lobbed the ball back in the civil aviation ministry’s court.
To begin with, the state carrier has been asked about its financial performance in the last six months and details of measures it has taken to reduce costs. “It is amazing that a company of Air India’s stature has not even bothered to provide a business plan for Nacil, no financial details are present in the proposal. It is very callously drafted…for example, why are performance-linked bonuses being given to staff even now when the airline is in such difficult financial situation? They need to be explained,” sources said.
Not just the finance ministry, even the Planning Commission is expected to pose some tough questions to Nacil once it examines this proposal for grants. The finance ministry’s comments have been discussed recently in a meeting between Nacil managing director Raghu Menon and civil aviation secretary M Madhavan Nambiar.
In reply to a question in the Lok Sabha, civil aviation minister Praful Patel had recently explained the need for enhancing Nacil’s equity base since it has already drafted an aircraft acquisition programme of approximately Rs 44,000 crore. “It is necessary to ensure that the equity base of the company is adequate to support the capital requirement by ensuring a better debt-equity ratio,” he said.
Besides, declining air traffic and consequent drop in yields per passenger have eroded Nacil’s profitability in recent months, leading to the request for a soft loan. Already, the carrier has doubled its total demand from the government from the earlier Rs 2,300 crore.
According to some estimates, the airline’s working capital requirement has gone up by almost 50% to Rs 9,550 crore this year and Nacil is finding it tough to continue generating working capital in these trying times. Which is perhaps why the soft loan demand has been more than doubled to Rs 2,750 crore.
The remaining amount is being sought as equity, since Nacil’s equity base is abnormally low at just about Rs 145 crore.
Nacil’s fresh demand comes on the back of falling load factors and fears of slipping further into the red unless substantial working capital and loan amounts are raised quickly.
The carrier was looking at almost Rs 4,000-crore loss this fiscal (against Rs 2,144 crore projected earlier) before the ATF prices slid to their present lows. At that time, Nacil was losing a whopping Rs 13-14 crore daily.
In hangarNacil’s fresh demand comes on the back of falling load factors and fears of slipping further into the red
According to some estimates, the airline’s working capital requirement has gone up by almost 50% to Rs 9,550 crore this year
The airline company has already drafted an aircraft acquisition programme of approximately Rs 44,000 crore
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