Monday, January 24, 2011

Declare Air India as sick company

Air India

NEW DELHI: As India's civil aviation minister, Praful Patel had staunchly fought against any move to declare Air India a sick company. But as the new minister for heavy industries and public enterprises, Patel may have to declare the national carrier a sick company.

Patel's ministry has notified a new criterion to identify state-run firms that are terminally sick. Air India may fall in this category if the new norms are applied to the debt-ridden carrier.

The new norms, notified by the department of public enterprises a day after Patel took charge, say a financially troubled state-run firm would be considered a 'turnaround ' case only if it had reported profits in three preceding financial years. Also, the profits should be without any grants from the government or a loan waiver from a financial institution.

But Air India reported losses in the past two fiscals, although it has succeeded in cutting these losses. The carrier posted a loss of Rs 7,189 crore in 2008-09 and Rs 5,551 crore in 2009-10. The carrier had a debt of around Rs 40,000 crore against an equity base of Rs 1,000 crore. The troubled carrier also got an equity infusion of Rs 1,200 crore in December 2010, as without this lifeline it would not have been able to pay wages beyond March 2011.

Air India, if declared sick, would be referred to the Board for Restructuring of Public Sector Enterprise, which falls under the department of public enterprises. The civil aviation ministry had in the past firmly resisted any move to bring the loss-making airline to the board, arguing that the company was not sick. An airline official said a company should be at least five years old to come under the purview of the board. "But the merged entity Nacil (National Aviation Company of India Ltd), which is Air India Ltd now, is only three-and-a-half years old since it was incorporated in 2007. This is what we even told the Cabinet.


NEHA JAIN                                                                                                                

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