Aviation Ministry seeks uninterrupted ATF supply for Air India

Coming to the aid of Air India, the Civil Aviation Ministry has sought uninterrupted supply of jet fuel to the cash-strapped carrier, saying steps were being taken to ensure regular payments to the oil companies.

Days after a meeting, Civil Aviation Minister Vayalar Ravi had with his Petroleum counterpart S Jaipal Reddy, Civil Aviation Secretary Nasim Zaidi sent a note to this effect to the Petroleum Ministry on Friday, official sources said.

The Ministry has said that oil supplies should not be disrupted in case of delay of a day or two by Air India in making daily payments, as the airline could face problems releasing funds on a day-to-day basis due to cash crunch, they said.

Maintaining that abrupt stoppage of fuel supplies led to flight disruptions causing hardship to air travellers, it also assured that Air India, which has been put on a cash-and-carry mode since December seven, would inform the oil PSUs in advance if it feels that it would face such problems in the near future, they said.

Latest official figures show that as on June 30, the total dues outstanding to IOCL, HPCL and BPCL were Rs 1,558.18 crore, Rs 342.27 crore and Rs 432.65 crore respectively, totalling over Rs 2,333 crore.

Air India's fuel bill has also risen from Rs 12-13 crore to Rs 15-16 crore per day partly because of the rise in price of aviation turbine fuel (ATF).

Airline officials say that out of a total daily average revenue collection of Rs 22 crore, Rs 16.7 crore is being paid daily to oil companies, leaving only Rs 5.3 crore to meet repayment of aircraft loans and part of interest payment on working capital.

The ailing national carrier had to cut down its flight operations between May 27 and June 2 when fuel supplies were disrupted by oil PSUs due to non-payment. As many as 147 out of an average 320 daily flights were cancelled then.

The latest threat came four days ago when oil firms stopped jet fuel supplies, but resumed it within an hour following government directives.

The airline gets around 225 kilo litre of ATF daily to meet its requirements. The oil marketing companies had placed Air India under the cash-and-carry scheme due to its huge outstandings.

Airlines normally have a 90-day credit period to pay their fuel bills, but oil companies have refused to follow this rule with Air India after it defaulted on payments a few times.

Air India has also been seeking discounts from oil companies, similar to the ones they give to private carriers.

Oil companies give a Rs 1,600-1,800 per kilo litre discount to private airlines on promise of assured payment. After adding finance charges for a 90-day credit period, the discount comes to about Rs 3,600 per kilo litre.

The note by Zaidi came a day after Civil Aviation Minister had a meeting with Petroleum Minister S Jaipal Reddy over the oil companies threatening to stop the ATF supply.

Ravi said Reddy has directed the oil firms not to stop supplies without notice. "Unfortunately, sometimes the supplies are stopped and that disrupts the flights. I told Reddy, at least inform us.... He agreed and I think it will be good for Air India," he had said on Friday.

Officials said Air India had failed to pay Rs 10 crore to Indian Oil Corporation, Rs 3.4 crore to Bharat Petroleum Corp Ltd (BPCL) and Rs 2.7 crore to Hindustan Petroleum Corp Ltd (HPCL) last week.