State-owned Hindustan Petroleum Corp Ltd will sell jet fuel to Vijay Mallya-run Kingfisher Airlines only against cash as it has failed to provide bank guarantee cover against payment defaults.
HPCL is Kingfiher Airlines' largest aviation turbine fuel supplier.
The airline, which buys 1,300-1,350 kilolitre of jet fuel worth some Rs 133 crore (Rs 1.33 billion) every month, has defaulted on its payments.
"Currently, Kingfisher Airlines has been put on cash-and- carry arrangement by HPCL as they have been unable to fulfill the obligations imposed by HPCL board," Minister of State for Petroleum and Natural Gas Jitin Prasad told Rajya Sabha on Tuesday. Kingfisher buys jet fuel on a 60-day credit cycle.
The cash-strapped airline has defaulted on payment of Rs 224.95 crore (Rs 2.24 billion, beyond the agreed credit period as on March 31.
Together with late payment interest of Rs 50.87 crore (Rs 508.7 million), Kingfisher had an overdue of Rs 275.82 crore (Rs 2.75 billion).
In a written reply to a question, Prasad said Kingfisher had a total outstanding of Rs 525.54 crore (Rs 5.25 billion) as on March 31.
This included Rs 249.72 crore (Rs 2.49 billion) due that was well within the agreed credit period and Rs 275.82 crore (Rs 2.75 billion) overdue outstanding.
The airline had agreed to submit a bank guarantee of Rs 250 crore (Rs 2.5 billion) by June end.
This collateral could be encashed by HPCL in case Kingfisher was to default in future.
The Airlines has however not kept its word.
Prasada said the oil ministry had advised HPCL to convene a special board meeting to consider the issue of outstanding dues from Kingfisher.
"Accordingly, board meeting was convened by HPCL on March 30 to consider the issue of outstanding dues. The board of directors after due deliberation directed to continue the existing payment arrangement of 60 days credit with Kingfisher Airlines, subject to certain conditions," he said.
Mallya has last month met oil secretary S Sundareshan to discuss the defaults but did not say by when his group firm will clear the outstanding amount.
