Govt clears Rs8bn equity infusion in Air India

The Government has approved the proposal for release of equity support of Rs8bn in two equal monthly installments to National Aviation Company of India Ltd. (NACIL). This equity infusion had earlier been approved by the GoM headed by the Finance Minister. The release of funds will be calibrated to the achievement of milestones laid down by the Group of Ministers (GoM). NACIL is currently facing severe financial losses which is compounded by its costly legacy assets, weakening revenue stream and high cost structure, resulting in rising liabilities. The GoM had accepted the company’s savings and cost reduction plan of Rs.1911 crores for the financial year 2009-10. NACIL has initiated action as part of the Turnaround Plan along with cost reduction/revenue enhancement programme. NACIL’s present paid up equity capital of Rs.145 crores is not sufficient for an aviation company of its size. The equity induction will not only ease the cash flow situation of the company but would also preclude borrowing from the markets at a high cost. The turnaround/restructuring plan of NACIL will be monitored and reviewed by Ministry of Civil Aviation, COS and GOM periodically.