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The government's special purpose vehicle Air India Assets Holding (AIAHL) will soon ask banks to slash interest rates, from 10.5-11 percent at present to nearly 8.5 percent, on the Rs 29,464-crore working capital debt of Air India that it took over.
The loan of Air India was shifted to the SPV back in 2018 to make the airline attractive to potential buyers during the airline's divestment process. An official source told The Financial Express on condition of anonymity that AIAHL will negotiate restructuring and refinancing of the debt.
If this is approved, AIAHL will be free of interest burden of nearly Rs 300-400 crore per year, as nearly Rs 15,000 crore of the expensive debt would be recast. It is unclear whether this would be approved as banks, which includes the State Bank of India, are not obligated to cut the rates.
The decision will largely depend on the banks' management and the central government's persuasion.
On February 28, the Cabinet approved the transfer of Air India's accumulated working capital loan over to AIAHL without the backing of any asset, as a part of the strategic divestment process of the state-run airline. The airline's non-core assets like artefacts and paintings were also kept with the AIAHL, and the entity has a mandate to monetise them. Air India's total debt is reportedly at Rs 55,308 crore.
The SPV was incorporated in January 2018. And, on its board are CMD of Air India and its director of finance, along with joint secretaries of departments of civil aviation, expenditure, economic and DIPAM.
The government also allocated nearly Rs 2,600 crore to service the loan in AIAHL during the interim budget for 2019-20. The carrier's non-core assets, which are worth nearly Rs 5,000 crore, will also be used to pare the debt. The funds from the sale of Air India and Air India Express, when it happens, will be used for the same loan.
The disinvestment process of the airline will be resumed once a fresh government is seated after the elections in May. The process was called off in June 2018 when the Centre could not find any takers for the airline.
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