Friday, December 16, 2011

Air India gets revolving credit from oil firms

The Petroleum Ministry has intervened to allow a revolving three-month credit facility to Air India from state-run oil marketing companies thereby stopping the oil firms from implementing a cash-and-carry system for jet fuel supplies from today.

“In terms of the decision taken by the Group of Ministers on October 28, the three-month period of credit may continue so long as the payments due, as per schedules, are made by Air India to OMCs,” the ministry wrote to three OMCs and the Civil Aviation Ministry today.

“However, in the event of default/delay in payment, the OMCs will have no option but to impose cash-and-carry supply terms on ATF supply to Air India,” it added. The OMCs have sought the first payments for the three-month credit facility on December 22, sources said.

On December 12, three OMCs had shot off a joint letter to Air India that “with effect from December 16, supplies shall be under cash- and-carry system.

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“Air India should make payment in advance by RTGS (real time gross settlement) on or before December 15,” said the letter to Air India’s director (Finance) S Venkat. “If there is any default in payment, oil companies will be constrained to suspend supplies.”

OMCs said that the three-month credit ended on December 15 as it came into effect on September 16. But Civil Aviation Ministry requested that it continue until the “operationalisation of Air India’s Financial Restructuring Plan”.

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