In the recent development of events, the Finance Ministry of India has directed all central ministries and government departments to pay off their dues to Air India instantaneously. Moreover, the Department of Expenditure (DoE) has instructed that all the government departments may purchase Air India tickets only on a cash basis. The changes are taking place as the national flag-bearing carrier has been taken over by Tata Group and a decision has been made to bring a stop to providing credit facilities to government departments.
Unpaid Government Dues – A Major Cause for Airline’s Financial Struggle
A memorandum was issued by Doe under the finance ministry on Wednesday stating that all ministries/departments are directed to clear Air India’s due immediately. Air tickets from Air India may be purchased in cash until further instructions.
A memorandum issued in 2009 states that in all the cases where the central government bears the expense for air travel of the officials including for LTC (Leave Travel Concession), the tickets can only be purchased from Air India. Air India has been struggling financially for around two decades now and one of the major reasons for working capital issues has been cited as hefty government dues on account of VVIP travel, evacuation operations, and other travel operations.
Earlier this week on Monday, the share purchase agreement was signed between TATA Group and the central government. The agreement includes the sale of Air India to Talace Pvt. Ltd. a subsidiary of TATA Group for Rs 18000 Crores. Previously, the bid for the purchase of Air India was accepted by the government where Talace Pvt. Ltd. would pay Rs 2700 Crores in cash and would take over Rs 15,300 Crore of debt in order to fully acquire the airlines.