The Indian Ministry of Finance has dismissed a proposal put forward by the Ministry of Civil Aviation to waive Air India (AI, Delhi International) INR300 billion rupee (USD4.15 billion) debt in one go, The Economic Times has reported. The government is, however, still debating a new bailout for the carrier.
"The money will not come in one go but could come in instalments. Air India needs to get rid of its debt trap and a one-time support by the government would have helped AI," an aviation ministry official said.
In addition to the debt waiver, the Ministry of Civil Aviation also suggested a INR100-110 billion rupee (USD1.4-1.5 billion) capital injection.
The carrier is under growing pressure from its creditors to repay at least part of its debt. Oil companies, to which Air India owes INR50 billion rupees (USD690 million), reportedly demanded that the carrier repays at least INR200 million rupees (USD2.8 million) per day.
Seeking extra capital, the airline is nearing the sale of its former headquarters in Mumbai and is also looking to divest from a number of subsidiaries, including the loss-making regional unit Alliance Air (India) (9I, Delhi International). Without the government's support, these measures are unlikely to help Air India.
The Indian government tried to sell a 76% stake in the flag carrier earlier this year, but found no interested parties. It is now reportedly aiming to improve Air India's financial standing enough to attempt privatisation again after the 2019 parliamentary elections.
Besides the fuel suppliers, state-owned Airports Authority of India is another major creditor of the carrier. Air India owes the infrastructure operator INR30 billion rupees (USD415 million).
As a short-term solution, the government has recently injected nearly INR10 billion rupees (USD140 million) into Air India and also guaranteed a INR20 billion rupee (USD275 million) loan.
The Indian flag carrier last was granted a bailout package in 2013. The then government granted the carrier INR300 billion rupees (USD4.15 billion) which were due to suffice until 2021. Ouf of this package, the carrier has already received INR270 billion rupees (USD3.7 billion) in instalments.