AI may receive first tranche of equity infusion by Jan' 2010

Mumbai: Struggling national carrier Air India (AI), the brand name for holding company, the National Aviation Co of India Ltd (Nacil), will get Rs2,007.6 crore ($418 million) by way of a first tranche of equity infusion from the  government. The tranche is expected to be paid in by December, or early January, according to civil aviation ministry officials.

A sovereign guarantee from the government to  restructure Rs16,000 crore ($3.33 billion) of working capital loans will also allow AI to save at least Rs500 crore ($104 million), officials said.

The government has previously extended sovereign  guarantees on loans for AI to buy aircraft.

According to officials, talks for a sovereign guarantee to help recast some high-cost working capital loans  were on with the finance ministry. They stressed that no time frame was set for a resolution of the matter.

The equity infusion will allow NACIL to raise loans at friendlier interest rates of 7-8% as against current market rates of 12%.

It is expected that equity infusion will take place over three years with Rs2,000 crore each in the first and second years and Rs1,000 crore in the third, officials have indicated.