Oil Cos: Air India not honouring Rs 100cr/month payment

State-owned oil companies on Tuesday accused Air India of not honouring its commitment to pay Rs 100 crore every month to clear overdue ATF outstanding of over Rs 5,000 crore and will be forced to snap supplies at major airports from Friday if no solution is offered.

"Air India had back in June and again in September agreed to pay the three oil marketing companies Rs 100 crore every month to clear past ATF dues. But unfortunately it hasn't met its commitment," said Sandeep Kumar Gupta, Director (Finance), Indian Oil Corp (IOC).

IOC and two other oil marketing companies, Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL), have served a notice on Air India that they will be forced to stop jet fuel (ATF) supplies if payments are not made, he said.

The monthly payment was besides the airline being put on cash-and-carry where it was given fuel only against cash payment.

"We have said we will stop supplies at major airports. Let's see what is the outcome of negotiations before the October 18 deadline," Gupta said.

Air India owes IOC about Rs 2,700 crore in unpaid fuel bills. This includes Rs 450 crore of interest. It's outstanding towards the three oil firms is about Rs 5,000 crore including interest.

Gupta said the oil companies haven't indicated the airports where supplies will be stopped but they will be major airports, unlike the six small airports where fuel supplies to Air India aircraft were stopped in August.

Supplies were resumed last month after Air India committed to paying Rs 100 crore every month to oil firms to clear past dues, he said adding Air India buys about Rs 13-14 crore worth of fuel every day from IOC.

IOC controls about 50 per cent of the market share.

August 22, IOC, BPCL and HPCL had stopped fuel supplies to Air India at six airports of Kochi, Mohali, Pune, Patna, Ranchi and Vizag over payment defaults.

However, after the intervention of the Ministry of Civil Aviation, they resumed fuel supply on September 7.

On October 5, the oil companies had told Air India that if it did not make the monthly lump sum payment, they will stop fuel supply from October 11 at "six major domestic airports". Subsequently, Air India wrote to them requesting not to stop the fuel supply.

The OMCs wrote back on Thursday itself, stating that "while we are in receipt of your letter dated 10th October 2019, requesting OMCs against stoppage of fuel supply, it has been observed that no timelines have been mentioned with respect to the lump sum payment".

"However, taking into consideration your request, we are deferring our decision to suspend supplies to October 18, 2019," they said.

The OMCs requested the national carrier to adhere to its commitment to making lump sum payment towards "overdue outstanding, failing which we will be reviewing our decision and stop supplies as per above notice".

In Thursday's letter, they mentioned that the "commitment towards daily payment has been mostly adhered to by Air India... the outstanding has not come down considerably in the absence of the committed monthly lump sum payment".

The Centre is planning to initiate the process of divestment of its stake in Air India, which has a debt of over Rs 60,000 crore, from November this year. In 2018-19, the national carrier posted a net loss of around Rs 8,400 crore.