Government asks Air India to resubmit proposal for capital infusion of Rs1,000 crore

New Delhi: With market conditions acting as a dampener, the civil aviation ministry has asked Air India's parent company NACIL to revise and re-submit a proposal that seeks an infusion of funds from the government to the tune of Rs1,000 crore.

The capital infusion is meant to enable the recently amalgamated flag carrier to meet growing competition, and take on the onslaught of rising fuel costs. Dramatically rising fuel costs have left airlines around the world reeling.

Once NACIL submits a revised proposal, the civil aviation ministry will approach the finance ministry with an improved capital infusion plan. The revised proposal will address issues such as the basis for which the government should provide funds to the carrier – a reason which it had failed to address adequately in its earlier presentation.

The National Aviation Company of India (Nacil), an entity created by the merger of Air India and Indian Airlines, was supposed to raise these funds through an IPO, which is not feasible at the moment given the soft market conditions.

According to government sources, the funds may be forwarded as a loan or as equity infusion. Air India incurred a net loss of Rs447.9 crore and Indian Airlines reported a net loss of Rs240.3 crore for the fiscal 2006-07.

The airline is currently inducting new aircraft to its fleet and has total of 111 aircraft on order with Boeing and Airbus. These aircraft will be delivered through to 2011.