Oil firms supply fuel to SpiceJet on 'cash and carry' basis

After a brief hiatus, oil companies on Wednesday began supplying jet fuel to Spicejet after the troubled airline paid cash for the purchases.

The budget carrier is getting fuel as per the terms of 'cash and carry' agreement put in place about six months back.

"We never stopped supply fuel. We supplying fuel to them as late as yesterday late afternoon. They did not come to buy fuel after that and so we did not supply any. They came this afternoon and so we are supplying them," a top executive at a public sector oil firm said.

SpiceJet had been put on cash-and-carry about six months back, which meant fuel will be supplied to the aircraft only if they pay for it, they said.

SpiceJet used to buy about Rs 5.5 crore worth of fuel daily from Bharat Petroleum Corp Ltd (BPCL) but six months back it shifted some purchases to Hindustan Petroleum Corp Ltd (HPCL) and Reliance Industries.

The daily offtake had since then fallen due to grounding of several of its aircraft and SpiceJet cutting back its fleet. SpiceJet this morning grounded all its aircrafts due to payment woes.

The Civil Aviation Ministry had yesterday stated that the airport operators would be asked to give the airline 15 days to make payments, while state oil companies would be asked to give credit for up to 15 days.

Sources said oil companies extend credit only after payments are secured either through a Letter of Credit or a Bank Guarantee.

SpiceJet has so far not cleared its stand on the issue of providing guarantees and it remains to be seen if the government will force oil firms to waive off the provision to help the airline get fuel.