Clearing Dues is the Biggest Hurdle in Air India’s Financial Burden
Mumbai -The loan cycle among Air India, the Indian government, and the Oil companies are constantly going on in a loop as pressure starts to mount on each one of them.
Air India has a fuel bill of Rs 5,000 crore due to be paid to the fuel retailers. These retailers too need extra cash to buy more dollars to be able to purchase fuel especially at such a time when the demand is picking up. The center is yet to take a call on the times or the duration that the airline needs to be given to clear all the dues.
Air India has been surrounded by numerous controversies since last month. Last week, the finance ministry scrapped an outstanding order that required government officials to travel only by the national carrier Air India. The statement said that the departments must clear all the remit dues to the airlines ‘immediately’.
As of the fuel, companies are concerned, Indian oil alone is owed Rs 3,000 crore which is 60 percent of the total amount. Other fuel suppliers then contribute to the remaining Rs 2000 crore in the leftover price. The airline must find a solution to clear all its dues as soon as possible, stresses financial experts.
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Many fear that if such a large sum of cash gets stuck, it will negatively impact the cash flow in the country, which is already at one of the lowest in the last five years. The problem is that these fuel companies need instant solutions to their financial issues and for Air India, it is not possible.
There are talks about holding the firm Air India Asset Holding Company, a move which sure-shot fetch monetary relief in coming years but if the airlines think about the present situation, this move will hardly be of any help. But amid all this, crude oil buying must continue and for this companies like Indian oil must borrow money from top layer suppliers.
Crude Oil is getting expensive with each passing day as it touches an all-time high in seven years with $85 per barrel. The cost clearly justifies the need for cash of the oil companies however, Air India too is running on major troubles for it be able to pay the dues in one go given the circumstance.
With the cost, the demand for petrol is also rapidly rising, Even if it is compared to the pre-pandemic level, the demand is much higher making the Indian oil companies run errands to buy fuel in large quantities. The long-term solution is what the airline is eyeing. The holding company will hence be talking over all non-core assets such as land, buildings, and painting which is summing up to be over Rs 14 crores. The entity will also take over unpaid bills of airports, sellers, operators, or vendors which sums up to over Rs 15 crores.
