The State Bank of India-led consortium of banks has broadly agreed to the financial restructuring plan of Air India.
This plan includes conversion of short-term working capital loan of Rs 7,000 crore into cumulative preferential shares and more time to repay the remaining debt amount of approximately Rs 14,000 crore.
The banks met with top officials of the Civil Aviation Ministry and Air India here on Monday evening to give their approval.
“The banks will formally initiate the process for financial restructuring plan while the State Bank of India will approach the Reserve Bank of India for some clarification on some regulatory issues,” a person familiar with the development said.
On the other hand, the Government will start the process of preparing a Cabinet note within the next 3-4 days on a comprehensive financial restructuring package for Air India after the SBI indicates the RBI's position on the regulatory issues, he added. The RBI is expected to clarify its stand within the next 30-45 days.
According to an official, the Government also indicated its plan for equity infusion into the airlines. It includes Rs 6,750 crore for the current financial year while Rs 17-18,000 crore for the next nine years. If it is approved, the cash-strapped airline will get an average of Rs 2,475 crore annually. The Government has already injected Rs 2,000 crore during the current financial year.
At the meeting, the Government clarified that it was willing to pump in additional funds into the state- owned carrier when some banks expressed concern over the issue. They also wanted to know how soon the two divisions – maintenance, repair and overhaul (MRO) and ground handling – would be hived off into two business units.
Bankers also sought a monitoring mechanism and wanted a representation on the body.
The airline has total of Rs 21,511.10 crore as short-term working capital loans. It pays an interest of over Rs 2,600 crore annually.