Air India awaits cabinet clearance for raising capital

New Delhi, Feb 22 (Calcutta Tube) The cabinet will meet soon to take a decision on Air India’s plan to raise its working capital by Rs.10 billion (Rs.1,000 crore), Civil Aviation Minister Praful Patel said here Monday.

‘We will put a whole picture before the cabinet. We will have a meeting soon,’ Patel told reporters here.

The government last week approved equity infusion of Rs.800 crore ($160 million) for the state-run National Aviation Co of India Ltd (NACIL), the company that runs the carrier Air India, in two instalments to tide over its cash flow problem and to finance fleet acquisition plans.

Following this, the NACIL Saturday decided to raise its working capital from Rs.17,000 crore to Rs.18,000 crore.

According to airline officials, its borrowings have risen from Rs.6,550 crore in November 2007 to Rs.15,241 crore in June 2009.

The company’s present paid-up equity capital is Rs.145 crore ($29 million) and that was found grossly insufficient for an aviation company of its size. The fresh equity will also preclude borrowing from the markets at a high cost, officials said.

The airline had posted a loss of Rs.7,200 crore in the last two fiscal years. The induction of fresh equity was approved only after it adopted a turnaround plan.

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