Indian Oil seeks comfort letter from Govt on AI dues

New Delhi: With the government now providing further relief to embattled flag carrier Air India on clearance of dues for aviation fuel, increasing credit period to 60 days, refiner-marketer Indian Oil Corporation (IOC) has sought a comfort letter from the civil aviation ministry assuring payment of unpaid fuel bills.

Industry sources remark that perhaps for the first time a public sector oil company is standing up to the government to safeguard its legitimate business interests.

According to reports, oil ministry sources have said that Indian Oil chairman RS Butola has been drawing fire from independent directors on the oil PSUs board over Air India's accumulating dues. Questions have been asked why the company was incurring losses from delayed payments and lost interest and still continued to supply a "defaulting party".

Indian Oil supplies 65% of Air India's fuel needs and refuels the carrier on a cash-and-carry basis. The carrier enjoys a credit limit of Rs1,700 crore but has now run up bills of Rs1,578 crore as of the third week of August.

The amount excludes Rs373 crore interest on dues.

Even as dues are piling up a Group of Ministers (GoM) panel decided to allow a 60-day credit period to the airline. Should the decision be implemented, Air India's total dues would touch Rs2,200 crore, excluding interest, and cross the approved limit.

Under the circumstances, Butola has suggested that the aviation ministry provide a letter assuring Indian Oil of payments and indicating liquidation plan for the outstanding over a short period of time.