At least six Air India flights were cancelled on Friday as the airline prepared a contingency plan to meet a fuel shortage after three state-owned oil firms refused to supply jet fuel till it paid off its mounting dues.
Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation, which had put the ailing carrier on notice to get its daily fuel on cash-and- carry sales model in December last, sent a notice asking it to pay the debts which have risen due to the recent spate of increase in the price of aviation turbine fuel (ATF).
At least six flights, mostly from Thiruvananthapuram, were cancelled due to fuel shortage, airline officials said.
They said crew on all international flights have been asked to buy extra fuel while returning home. The airline operates nearly 320 flights on domestic and international sectors daily.
The oil firms had asked cash-strapped Air India to set up a roadmap to clear over Rs 2,400 crores in past fuel bills and make upfront payment for all future purchases of ATF.
Air India has already raised the matter with the civil aviation ministry and was expecting an early resolution, an airline official said. The ministry has already held at least two rounds of discussion with officials of Air India and the oil PSUs since March.
After the oil firms put the airline on cash-and-carry mode in December 2010, Air India was paying an average daily amount of Rs 13.5 crores during the past few months.
This amount has now risen due to the fuel price hike and the oil firms are asking the airline to pay up the additional cost, he said.
"We are making efforts to uplift fuel from other source sand trying to keep our operations normal," the airline official said.
Maintaining that the government owed Air India about Rs 450 crores for its services, he said it would be able to pay off a large part of the debt if this amount was given to it.
While government owed Rs 344 crores for VVIP operations rendered to the Prime Minister's office and the ministries of defence and external affairs, another Rs 106 crores was due from the government for the recent evacuation of Indian nationals from Libya, he said.
But the oil marketing companies have conveyed to the airline that it would be sold its daily ATF requirement only on the basis of cash which it is able to pay.
Air India had defaulted on payment of about Rs 2,000 crores in jet fuel bills since 2010 and the total outstanding now amounts to over Rs 2,400 crores after including Rs 400 crores in interest, according to the estimates of the oil firms.
In March, Air India had urged the government to ask the oil companies for discounts as was given to the private airlines, saying the national carrier had never failed to make payments since the cash-and-carry system had begun.
The issue was discussed at a meeting called by Cabinet secretary K.M. Chandrasekhar where Air India had pointed out that oil PSUs gave a Rs 1,600-1,800 per kilo litre discount to private carriers on the promise of assured payment.
But oil PSUs have said Air India was only discussing payments for future ATF purchases and there was no word on how it would clear the past outstanding. They also pointed out that ATF purchases by airlines like Jet Airways and Kingfisher Airlines are covered by a bank guarantee.