Air India seeks short term loans for meeting urgent working capital requirements
Debt-ridden national airliner- Air India is seeking an immediate injection of Rs 1500 crores to meet its working capital requirements. This is the second time in over a month that the Air India is seeking short term loans to run its operations. Already, government is searching several options to bail out the transporter in the context of its huge debt of around Rs 50000 crores.
Short term loans are the precious money for the entity to finance its day to day operations. Almost a month back, Air India availed Rs 3500 crores.
At present Air India is availing a 10-year bailout package from the budget that started in 2012. It is will get around Rs 30231 crores but obtained Rs 26,000 crore of the amount.
Government’s plan is to disinvest a part of the shareholding but procedures for it is yet to be started.
Concept
Working Capital – fund needed to meet day to day expenses like salaries, purchase of raw materials etc.
Backgrounder
Air India’s cost started escalating when the Indian Airlines was merged under it.
Later, the crude price rise increased operational costs.
Increased competition from private airlines made its life tough.
Air India has a conventional operational model with large number of staffs and a considerable proportion of the expenses goes as salaries.
In 2012, the government has sanctioned a bailout package for AI with an amount of Rs 30000 crores upto 2022, but bulk of that amount has been spent.
Recently, government is looking for other options including sale of substantial shares to other investors and a disinvestment.
For the time being, it seems that the government is proceeding with the disinvestment decision.
But Air India has to go for borrowing even to meet its day to day expenses and yearly interest payment itself is estimated to be around Rs 4000 crores.
