Govt clears equity infusion of Rs1,200cr for Air India

New Delhi: The Cabinet Committee on Economic Affairs (CCEA) on Thursday cleared equity infusion of Rs1,200 crore into badly struggling carrier Air India (AI). The additional capital increases the company's equity base to Rs3,345 crore, which will allow the carrier to raise working capital loans.

The airline is currently saddled with a debt of Rs46,950 crore on an equity base of Rs2,145 crore.

"As Air India is passing through critical financial crunch, the equity induction would not only ease the cash flow situation of the airline but would also preclude borrowings from the markets at high costs," said a government release.

The government move comes immediately after prime minister Manmohan Singh assured members of Parliament that Air India would not be allowed to run out of funds.

It is estimated that Air India is running up monthly losses of Rs600 crore, and its badly strained financial position does not allow it to pay staff salaries on time.

Air India is yet to clear salaries for June and July and performance-linked incentive (PLI) for May to its 38,000-odd employees. Also, the carrier is yet to clear dues of Rs4,500 crore which it owes to various vendors, such as airport operators and oil marketing companies.