AI: Govt may consider Rs 800 cr equity infusion

The government is likely to consider infusion of Rs 800 crore (Rs 8 billion) as equity in the cash-strapped Air India on Wednesday, but wants the airline to take "extraordinary" measures to achieve a financial turnaround.

The Union Cabinet, which is slated to meet in New Delhi on Wednesday, is likely to take up the issue, informed sources said.

A note on the matter has already been circulated by the Civil Aviation Ministry for the cabinet's consideration. The cabinet is also likely to consider some aviation infrastructure projects, they said.

While the government had earlier approved equity infusion of Rs 800 crore in Air India, the Group of Ministers (GoM) headed by Finance Minister Pranab Mukherjee, which met earlier this month, has not taken any final decision on the issue of another tranche of equity of Rs 1,200 crore (Rs 12 billion).

The GoM is expected to meet again over the next couple of weeks. The sources said Air India was unlikely to meet its own target of cost-reduction by Rs 2,000 crore (Rs 20 billion) by this fiscal.

The costs have been cut by about Rs 700-800 crore (Rs 7-8 billion) so far and "extraordinary measures" are required to save more, they said. Any further assistance would only be given on achievement of specific revenue enhancement and cost-reduction targets by the airline, the sources added.

The airline has been incurring heavy losses for the past few years Rs 2,226 crore (Rs 22.26 billion) loss in 2007-08 and about Rs 5,500 crore (Rs 55 billion) loss in 2008-09.