State-run oil firms have demanded that cash-strapped Air India set up a roadmap to clear over Rs. 2,400 crore (Rs. 24 billion) in past fuel bills and make upfront payment for all future purchases of aviation turbine fuel.Air India has defaulted on payment of about Rs. 2,000 crore (Rs. 20 billion) in jet fuel bills since last year and the total outstanding now amounts to over Rs. 2,400 crore (Rs. 24 billion) after including Rs. 400 crore (Rs. 4 billion) in interest, industry officials said. "Indian Oil, Hindustan Petroleum and Bharat Petroleum already incur huge losses on selling petrol, diesel, domestic LPG and kerosene way below their production cost and to expect them to sell ATF at subsidised rates is not acceptable," an official said.
Oil firms have put Air India on cash-and-carry since December. Air India buys jet fuel worth Rs. 18.5 crore (Rs. 185 million) per day from the three state oil firms, but it pays only Rs. 13.5 crore (Rs. 135 million).
This led the oil firms to threaten to stop supplies of ATF beyond what Air India pays for.
At a meeting called by Cabinet Secretary K M Chandrasekhar last week to resolve the payment impasse, Air India sought discounts similar to the ones given to private airlines.
Oil companies give Rs. 1,600-1,800 per kilolitre discount to private airlines on promise of assured payment.
After adding finance charges for a 90-day credit period, the discount comes to Rs. 3,600 per kl.
"Even if this discount is stretched to Rs. 5,000 per kl, the Rs. 18.5 crore per day fuel bill will not become Rs. 13.5 crore (Rs. 135 million).
"After including some more concessions, the fuel bill at best will come down to Rs. 17 crore (Rs. 170 million) a day, a far-cry from the Rs. 13.5 crore (Rs. 135 million) paying capacity of Air India," he said.
Officials said Air India was discussing only the payments for future ATF purchases and there was no word on how the state carrier will clear the past outstanding.
"Air India talks of getting the same discounts as private airlines, but does it know that ATF purchases by airlines such as Jet Airways and Kingfisher Airlines are covered by a bank guarantee?", an official asked.
Both Jet Airways and Kingfisher have brought down their outstanding to manageable levels and have provided bank guarantees to cover against any default.
IOC, HPCL and BPCL sell petrol, which the government had freed from its control in June last year, at a discount of about Rs. 4.50 a litre to its imported cost. In addition, they sell diesel at a loss of Rs. 15.79 a litre or Rs. 283 crore (Rs. 2.83 billion) per day.
Furthermore, the three retailers are losing Rs. 24.74 per litre of kerosene and Rs. 297.80 per 14.2-kg LPG cylinder.
The three firms are losing a cumulative Rs. 432 crore (Rs. 4.32 billion) in revenue every day on selling diesel, domestic LPG and kerosene below cost, officials said, adding that for the full fiscal, the three are projected to lose Rs. 78,061 crore (Rs. 780.6 billion) in revenues.
