The finance ministry is unlikely to sign on to the proposal for a ‘bad (debt) bank’, going by its response to some of the line ministries on similar proposals. The latest of those is the one to form a special purpose vehicle (SPV) to house Air India’s (AI’s) debt.
The finance ministry argues that debt of any entity must largely be serviced from its own resources, instead of expecting the government to pay for these. While the government is AI’s owner, the suggestion for it to take a haircut on behalf of the airline does not find favour.
has proposed to house a major portion of its Rs 45,000 crore of debt in an SPV, to cleanse its balance sheet. A third of the loans were raised to finance the cost of aircraft acquisition; the rest are for working capital. The loan overhang and the cost of servicing it at Rs4,000 crore a year cripples the airlines’ ability to set aside money for investment in route expansion or upgrading of services. The proposal is leant to have got the support of the civil aviation ministry. Read More…