Now,Air India flies into jet fuel crisis

“Air India is being supplied aviation turbine fuel (ATF) to the extent it is able to pay,” an official said.

Air India was put on cash-and-carry from December,but the airline continued to get fuel for more than its daily purchase capacity. However,oil companies are now supplying fuel on a strict sale only if cash is paid basis.

Oil companies last week sent a notice for stopping aviation turbine fuel (ATF) supplies to Air India at some airports like Calicut and Jaipur,officials said here.

Air India owes Indian Oil Corp (IOC) about Rs 1,900 crore. IOC meets 63 per cent of Air India’s jet fuel needs.

The national carrier has run up an outstanding bill of over Rs 300 crore with Bharat Petroleum Corp Ltd (BPCL),while its dues to Hindustan Petroleum Corp Ltd (HPCL) are relatively small.

Officials said during peak demand,Air India buys jet fuel worth Rs 18.5 crore per day from the three state oil firms,but it pays only Rs 13.5 crore. Its current requirement is worth about Rs 16 crore.

“Oil companies already incur huge losses on selling diesel,domestic LPG and kerosene way below their production cost and to expect them to sell ATF at subsidised rates is not acceptable,” an official said.

To tide over its cash woes,Air India has sought discounts similar to the ones given to private airlines.

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

“Even if this discount is stretched to Rs 5,000 per kl,the Rs 18.5 crore per day fuel bill will not become Rs 13.5 crore. After including some more concessions,the fuel bill at best will come down to Rs 17 crore a day,a far cry from the Rs 13.5 crore paying capacity of Air India,” he said.

Officials said Air India was discussing only the payments for future ATF purchases and there was no word on how the state carrier will clear the past outstanding.

“Air India talks of getting the same discounts as private airlines,but does it know that ATF purchases by airlines such as Jet Airways and Kingfisher Airlines are covered by a bank guarantee in case of default?”,an official asked.

Both Jet Airways and Kingfisher have brought down their outstanding dues to manageable levels and have provided bank guarantees to cover against any default.

6 flights cancelled as AI prepares plan to meet fuel shortage

At least six Air India flights were cancelled today as the airline prepared a contingency plan to meet a fuel shortage after three state-owned oil firms refused to supply jet fuel till it paid off its mounting dues.

Indian Oil Corporation,Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation,which had put the ailing carrier on notice to get its daily fuel on cash-and-carry sales model in December last,sent a notice asking it to pay the debts which have risen due to the recent spate of increase in the price of aviation turbine fuel (ATF).

At least six flights,mostly from Thiruvananthapuram,were cancelled due to fuel shortage,airline officials said.

They said crew on all international flights have been asked to buy extra fuel while returning home. The airline operates nearly 320 flights on domestic and international sectors daily.

The oil firms had asked cash-strapped Air India to set up a roadmap to clear over Rs 2,400 crore in past fuel bills and make upfront payment for all future purchases of ATF.

Air India has already raised the matter with the Civil Aviation Ministry and was expecting an early resolution,an airline official said. The Ministry has already held at least two rounds of discussion with officials of Air India and the oil PSUs since March.

After the oil firms put the airline on cash-and-carry mode in December last year,Air India was paying an average daily amount of Rs 13.5 crore during the past few months.

This amount has now risen due to the fuel price hike and the oil firms are asking the airline to pay up the additional cost,he said.

“We are making efforts to uplift fuel from other sources and trying to keep our operations normal,” the airline official said.

Maintaining that the government owed Air India about Rs 450 crore for its services,he said it would be able to pay off a large part of the debt if this amount was given to it.

While government owed Rs 344 crore for VVIP operations rendered to the Prime Minister’s Office and the Ministries of Defence and External Affairs,another Rs 106 crore was due from the government for the recent evacuation of Indian nationals from Libya,he said.

But the oil marketing companies have conveyed to the airline that it would be sold its daily ATF requirement only on the basis of cash which it is able to pay.

Air India had defaulted on payment of about Rs 2,000 crore in jet fuel bills since last year and the total outstanding now amounts to over Rs 2,400 crore after including

Rs 400 crore in interest,according to the estimates of the oil firms.

In March,Air India had urged the government to ask the oil companies for discounts as was given to the private airlines,saying the national carrier had never failed to make payments since the cash-and-carry system had begun.

The issue was discussed at a meeting called by Cabinet Secretary K M Chandrasekhar where Air India had pointed out that oil PSUs gave a Rs 1,600-1,800 per kilo litre discount to private carriers on the promise of assured payment.

But oil PSUs have said Air India was only discussing payments for future ATF purchases and there was no word on how it would clear the past outstanding. They also pointed out that ATF purchases by airlines like Jet Airways and Kingfisher Airlines are covered by a bank guarantee.