After clearing the implementation of relaxed external commercial
borrowing (ECB) norms to meet capital requirements in the power and road
sectors yesterday, the finance ministry today paved the way for
implementing the measures announced in the Budget for the airline
sector.
Keeping in mind the immediate financing concerns of the civil
aviation sector, Finance Minister Pranab Mukherjee, in his Budget
speech, had announced companies in the aviation sector would be allowed
to avail of ECBs for one year for working capital and refinancing of
working capital rupee loans.
ECBs under this provision would have a ceiling of $1 billion for the
entire civil aviation sector. The cap for individual airline companies
has been fixed at $300 million. This may be availed either in a lump sum
or in tranches, depending upon the utilisation of the limit during a
particular financial year.
Saying the Reserve Bank of India (RBI) would come out with the
relevant circulars and notification for implementing these measures
within a week, Joint Secretary, (capital markets), Thomas Mathew, said
the proposals of individual companies would be considered by RBI under
the approval route, based on parameters such as cash flows and the
capacity of individual companies to repay these loans from their foreign
exchange earnings.
To increase access to ECBs, RBI would consider relaxation in the
average maturity period for ECBs above $20 million from five to three
years, he said, adding the central bank would also keep a tab on the
utilisation of the funds.
?Working capital loans are short-term and attract higher interest
rates. Raising these through ECBs would reduce costs by 200 basis
points,? said an Air India official, on condition of anonymity.
On the possibility of raising the $1-billion limit, Mathew said, ?We
will answer this issue when we reach such a situation.? The civil
aviation ministry has already demanded this limit be raised to $2
billion.
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