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Budget 2015: Government has allocated Rs 2,500 crore for Air India

Industry experts welcomed the move saying it’s about time the government stopped cash handouts to the airline.

, ET Bureau|
Updated: Feb 28, 2015, 05.29 PM IST
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Industry experts welcomed the move saying it’s about time the government stopped cash handouts to the airline.
Industry experts welcomed the move saying it’s about time the government stopped cash handouts to the airline.
MUMBAI: The government has allocated Rs 2,500 crore fund infusion for state-run carrier Air India for the next fiscal year, an amount less than half of what it put into the airline last year and more than 40 per cent less than what it had asked for.

A senior executive at the carrier said the move will impact cash flows and debt repayments.

But industry experts welcomed the move saying it’s about time the government stopped cash handouts to the airline.

"Air India had asked for Rs 4277 crore as plan outlay for 2015-16 and has been given only Rs 2,500 crore. For the current fiscal year (2014-15), the government put in Rs 720 crore less than what was earlier decided. We thought that would be adjusted in the allocation for 2015-16, but what has happened it quite a different story," said the senior executive quoted above.

He added that the carrier’s loan repayment this year comes to Rs 2,400 crore and that may be impacted.

"Of course, there will be some savings from lower jet fuel prices etc, but I am not sure that will be enough," he added.

"The drastic reduction in budgetary allocation to Air India is a welcome step. It shows that the party is gradually coming to an end. The government has no business flying planes, and then making taxpayers’ pay for its losses.

MoCA should initiate steps for complete exit from Air India by divesting the shares to a strategic investor or to the Indian public", said Amber Dubey, partner and India head of aerospace and defense at global consultancy KPMG.

Air India has been making constant losses since 2007 when it was merged with domestic state-run carrier Indian Airlines. Since then it has been counting largely on cash handouts from the government to shore up its finances.

Lately, however the carrier has managed to cut its losses although it’s is a long way off from profitability. Air India’s estimated net loss for the ongoing fiscal is Rs 4,900, 20 per cent lower than last year. Air India Express, its low cost subsidiary which flies mainly to the middle least is expected to post its maiden net profit of about Rs 100 crore this fiscal year.

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