the government Tuesday said it will pay Rs.150 crore ($29 million) in dues it owes to Air India to help the cash-strapped national carrier tide over its financial crunch.
"We have agreed to release the Rs.150 crore dues owed by the government to Air India," Civil Aviation Minister Ajit Singh told reporters, adding "it should be released soon".
The development comes as the national carrier, reeling under an intense financial crunch, is facing problems in paying wages to its employees.
"The government has decided to release sufficient fund, to pay at least some part of their (pilots') wages and their PLI (productivity-linked incentives)," Ajit Singh said.
Pilots of the cash-strapped carrier went on a one-day agitation Saturday, but called it off after being assured by the airline management that all their dues would be paid by March-end.
The decision to release the amount was taken when Finance Minister Pranab Mukherjee-led group of ministers (GoM), which is looking into the financial woes of the airline, met here.
According to Ajit Singh, the amount being released was a part of an overall dues of Rs.600 crore which the government owed to the airline for services such as VVIP travel, among others.
"It (amount) is just the first part of it. Some ministries have approved (to pay their dues), others have to approve it," the minister said.
On Air India's debt restructuring plan, the minister said that the government will take a decision in the next GoM meeting. However, the date for the next meeting has not yet been decided upon.
"We will consider the financial restructuring plan in the next GoM," he said.
Currently, the national carrier has a total debt of Rs.43,777 crore, including loans and dues it owes to vendors like oil firms and airport operators.
The flag carrier has aircraft acquisition loans worth Rs.21,412.06 crore and working capital dues of Rs.21,511.10 crore, while it also owes huge amounts to various vendors.
The financial restructuring plan envisages restructuring of the Rs.42,923.16 crore debt the airline has accumulated for working capital and aircraft acquisition from a consortium of banks, which includes State Bank of India, IDBI and Bank of Baroda.
The minister added that a cabinet draft proposing 49 percent cap on foreign direct investment (FDI) by foreign carriers' in domestic airlines would be circulated in the cabinet which will look into the issue.
"The question was about allowing other airlines to participate in FDI. I discussed it with the finance minister and he has agreed. We will bring out a note for the cabinet now," he said.
Ajit Singh said that a committee of secretaries had also recommended that the FDI limit should be raised to 49 percent.
The commerce ministry's department of industrial policy and promotion (DIPP) had suggested a 26 percent cap.
"Private airlines in the country are in need of funds for operations and service upgradation to compete with other global carriers," said the DIPP note.
Currently, the government allows FDI up to 49 percent in Indian carriers by non-airline players but bans foreign airlines from direct investment for security reasons.
The issue of FDI from foreign airlines was also raised by airlines' chiefs when they met Prime Minister Manmohan Singh Nov 26, 2011.
Owing to high jet fuel and interest costs, three major airlines -- Kingfisher, Jet and SpiceJet -- reported heavy second quarter losses.