Govt panel for direct import of aviation turbine fuel by airlines

SummaryThe Pranab Mukherjee-led GoM's decision will come as a major boost for India's indebted airlines.

In major initiatives to strengthen the cash-strapped aviation sector, a Group of Ministers on Tuesday decided to allow airlines to directly import jet fuel to enable them to save on high incidence of tax and permit Air India to raise Rs 7,400 crore by issuing bonds or other means.

The GoM, headed by Finance Minister Pranab Mukherjee, was also apprised of the decision to allow foreign airlines pick up 49 per cent stake in Indian carriers.

While the decisions on direct import of aviation turbine fuel (ATF) and allowing foreign airlines to invest would go to the Union Cabinet for a final nod, the Cabinet Committee on Economic Affairs would take up Air India's financial restructuring plan for approval soon, Civil Aviation Minister Ajit Singh said after the 90-minute meeting.

“First thing is that on Air India's financial restructuring, the GoM has taken a view. Bonds will be issued, but this will have to go to the Cabinet. Bonds, and there are other ways, GoM has more or less taken a view on this,” he said, adding that about Rs 7,400 crore would be raised through these means.

On ATF imports, Singh said airline “companies will be allowed to import fuel directly for their use. This also has to go to the Cabinet. GoM has approved this. We will try to see whether some kind of credit arrangement can be made”.

On questions of allowing foreign airlines to buy equity in Indian carriers, the Civil Aviation Minister said the issue, on which a decision was taken earlier, did not come up before the GoM which was apprised of the issue.

“FDI (by foreign carriers) did not come before the GoM. I met Finance Minister (Jan 17). We are moving a note. Then it will be moved to the Cabinet. It is basically for allowing 49 per cent FDI by foreign airlines. I expect this note to be sent soon,” Singh said.

Asked about the government infusing additional equity of about Rs 6,600 crore in Air India, official sources said this would also be done. Allowing the ailing national carrier to raise funds through government-guaranteed bonds or other means was “over and above equity infusion decision”, they said.

Banks and financial institutions had proposed several measures to beef up