Praful Patel meets Manmohan Singh; decision on equity infusion in Air India likely

Civil aviation minister Praful Patel today met Prime Minister Manmohan Singh amid indications that the Union cabinet is likely to decide on the much-awaited equity infusion worth Rs1,200 crore in Air India soon.

While Patel refused to divulge anything about the meeting describing it as a courtesy call, it is understood that equity infusion in Air India was among the issues that came up for discussion at his meeting with the prime minister.

Sources said a decision on the matter is likely to be taken by the cabinet committee on economic affairs soon as a Cabinet note was circulated by the civil aviation ministry a few weeks back.

In addition to the Rs1,200 crore equity, the ministry is understood to have mooted a proposal for further infusion of equity over the next few years at least to the tune of Rs5,000 crore, seeking another tranche of Rs2,000 crore in the next fiscal.

Patel had recently told Press Trust of India that the national carrier would require additional equity to meet its mounting debt burden in addition to the proposed Rs1,200 crore equity.

Government intends to raise its working capital to about Rs7,000-8,000 crore, he had said.

The infusion was being made in tranches to make the airline more accountable and improve its performance by enhancing revenues and cutting costs drastically.

The committee of secretaries had also recommended an infusion of an additional Rs5,000 crore. Government had extended Rs800 crore as equity in Air India in the last financial year, which was used primarily to help meet its huge debt burden.

The airline's management is estimating a revenue deficit of about Rs1,925 crore in the March-November period.

Air India has also suggested that the government provide sovereign guarantee to back the loans it has taken so far, mainly to fund its fleet expansion. Such a guarantee would help the airline restructure its debts.

The Reserve Bank of India recently asked the national carrier to provide a letter of support from the government due to a poor debt-equity ratio of the company.