Air India delays payments to banks

NEW DELHI: National Aviation Company of India (Nacil), which flies under the Air India brand, has delayed settling dues with lenders because of its inability to raise Rs 7,400 crore through a planned bond issue, raising fresh concerns over the financial restructuring plan cleared by the government six months ago.

At least two bankers confirmed the "delay" in payment beyond September although a senior Nacil executive said there were no overdues to the bank and whatever short-term liabilities had to be cleared would be cleared over the next few days when it gets a full-fledged government guarantee to raise fresh funds at a lower cost and retire its earlier high-cost loans.

The finance ministry has denied an unconditional guarantee to Nacil despite the Cabinet decision and civil aviation minister Ajit Singh's meeting with finance minister P Chidambaram a few days ago. The national carrier was forced to put off its bond issue as the finance ministry only issued a conditional guarantee, which would be valid in case all specified parameters are met, something that investors do not see as sufficient security.

Although a banker said Nacil issued a tender for a bond issue last week, citing an unconditional guarantee, the finance ministry is yet to issue the notification. The Air India executive, however, said too much should not be read into the issue as the guarantee, which would bind the government to take over the liability in case of a default by the airline, would be issued over the next week to 10 days. "It's all procedural. This often takes a little time," said the executive, who did not wish to be identified.

A senior executive at one of the large public sector banks too played down concerns. "There is a small due from Air India but it is not critical from the point of view of a non-performing asset. The company is in the process of raising money from the market and the guarantee is also expected to come through," the banker said. Another banker said Nacil was already in talks with financial institutions such as Life Insurance Corporation of India for the bond issue.

A government guarantee, along with equity infusion by the Centre and taking over aircraft loans, were the key elements of Nacil's Rs 30,000 crore financial restructuring plan cleared by the Cabinet in April.

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