New Delhi, May 27
The pauper Maharaja just about managed to survive the day after oil PSUs today restricted the supply of jet fuel on account of dues. Faced with yet another crisis, the cash-strapped Air India cancelled flights and scrambled to prepare a contingency plan to combine flights from tomorrow.

The three state-owned oil firms slashed the supply of aviation turbine fuel (ATF) to the national carrier by 20 per cent at all airports, leading to the cancellation of flights, including international ones. AI sources say as less fuel was supplied at Thiruvananthapuram early today, only four of the 10 scheduled flights could take off. However, Civil Aviation Ministry sources however peg the total number of affected flights across the country at 20.

Incidentally, Air India’s total fuel dues to Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation amount to about Rs 2,400 crore. With the spectre of fuel restrictions looming, the airline prepared a contingency to manage its schedules from major metro airports, tomorrow onwards. The crew on all international flights have also been asked to buy extra fuel while returning home. Meanwhile, the two sides reached an understanding during the day that curtailment in ATF supply would not be imposed on all airports. The cut in ATF supply could be restricted to some metros to give Air India the leeway to combine flights and adjust its loads and the daily schedule, the sources said.

Following intervention of top government officials on the issue, the oil companies also agreed to defer the deadline of payment of dues by another month. The oil companies, after putting the ailing carrier on notice to get its daily fuel on cash-and-carry sales model in December last, had sent a notice asking it to pay the debts which have risen due to the recent spate of increase in the price of ATF. At a meeting of a Committee of Secretaries, chaired by Cabinet Secretary K M Chandrasekhar and atended by Civil Aviation Secretary Nasim Zaidi and officials from the Ministries of Petroleum, Defence and External Affairs, Air India CMD Arvind Jadhav made a presentation, giving a detailed financial position of the airline as well as making a case for discounts for paying cash upfront to pick up fuel.

Air India also sought a discount on payments on the lines the oil marketing firms give to private players which are on a cash-and-carry mode. Experts however say that by asking oil companies to defer the date, the government had only deferred the problem to another day. “The solution lies in upgrading the product, making it attractive enough for passengers to opt for it by aggressive marketing, which would naturally translate into higher revenues. It is unfortunate that the product has not receive the kind of attention it warrants,” they say.

Air India’s daily requirement is of around 130 kl ATF, which costs the company around Rs 18.5 crore. Sources say the airline had been paying oil companies Rs 13 crore and getting fuel worth Rs 18.5 crore. Recently, however, oil companies told the national carrier that it would only get fuel for the money it was paying for.

Meanwhile, another issue that is understood to have come up for discussion was the payment of dues of about Rs 450 crore by the government to Air India. While the PMO, Ministries of Defence and External Affairs owe AI Rs 344 crore, the airline should be getting another Rs 106 crore from the government on account of relief and evacuation flights like those recently mounted to Libya.

Air India is already burdened with a debt of Rs 40,000 crore and grappling hard to mop up funds to keep the company afloat. It has incurred a cumulative loss of over Rs 13,326.86 crore since its merger with Indian Airlines in 2007 at the close of financial year 2009-2010. Before the merger, the losses reported by erstwhile Air India and Indian Airlines were Rs 447.93 crore and Rs 240.29 crore, respectively.