OMCs ask Air India to pay for jet fuel daily or face supply cut: Report

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Oil marketing companies (OMCs) have asked Air India to start paying for jet fuel on a daily basis or face a supply cut as the national carrier’s dues to oil companies have crossed Rs 5,000 crore, The Economic Times reported.

The move from oil companies comes after the national carrier cleared outstanding dues to foreign and Indian lenders and other vendors, but left out payments to oil companies.

Air India buys fuel worth about Rs 20 crore daily, but has not been able to pay their bills. An Oil Ministry official told the paper that the airline has not been making full daily payments for the last one-and-a-half year.

Read: Centre planning strategic sale of 4 Air India subsidiaries soon

"Air India has not been regular with payments due to its financial problems," a senior ministry official told the paper, adding that the two entities are negotiating.

The recent increase in jet fuel prices has further worsened the situation for the airline, a senior Air India official told the paper, affirming that the airline is in talks with oil companies to resolve this issue.

Apart from demanding daily payments, oil companies have asked the airline to come up with a firm plan to clear their dues. "We want them to provide us with a concrete plan on how the money is going to come back to us," a senior executive at a state-run oil company told the paper.

Read: Govt working on strategic sale of Air India subsidiary AIATSL

The airline had sought Rs 2,000 crore from the Centre after the government's planned 76 percent stake sale was called off. So far this year, the government has provided Rs 1,630 crore, including a supplementary provision of Rs 980 crore in August, to Air India as compared to the budget estimate of only Rs 650 crore to tide over the cash shortage.

The airline has already raised Rs 1,500 crore and can raise an additional Rs 500 crore. “The airline can raise Rs 500 crore and pay a part of it to oil companies,” an official quoted above told the paper.