The government will transfer about Rs 16,000 crore of unpaid fuel bills and other pending dues that Air India owes to suppliers, to a special purpose vehicle before handing over the loss-making airline to the Tata Group, a senior official said.
Air India Assets Holding Ltd (AIAHL), which will hold non-core assets of Air India such as land and building, will also be saddled with 75 per cent of the airline's debt that the Tata Group is not taking over.
Besides the debt, the excess liability going to AIAHL comprises unpaid fuel bills to oil companies, airport operators and vendors, said Tuhin Kanta Pandey, Secretary to the Department of Investment and Public Asset Management - the department running the privatisation programme of the government.
Pandey said he does not expect these dues to increase much by December-end as the government would continue to support the airline's operations by giving the Rs 20 crore fund required daily to maintain it as a going concern.
Before the handover of the airline to Tatas, the government would again work on the balance sheet of Air India for the remaining 4-month period (September-December) and whatever liabilities arise would be transferred to AIAHL.
As on August 31, Air India had a total debt of Rs 61,562 crore.
Of this, Tata Sons holding company Talace Pvt Ltd will take over Rs 15,300 crore and the remaining Rs 46,262 crore will be transferred to AIAHL.
Besides, non-core assets of Air India, including land and building, valued at Rs 14,718 crore are being transferred to AIAHL.
As much as Rs 15,834 crore due to operational creditors, like those for fuel purchases and other day-to-day operations, as of August 31 too would be transferred to AIAHL, Pandey said.
"The dues to operational creditors may not go up further in the September-December period if the government continues with the funding... They are dependent on Rs 20 crore/day, if the government shuts down funding then the dues will add up. So more or less it will not very much increase," Pandey said.
After adjusting for all the dues to lenders and operational creditors and also the assets of AIAHL, the net liabilities with AIAHL as of August 31 is Rs 44,679 crore.
The government has been incurring per day expenditure of Rs 20 crore to keep Air India afloat.
Excessive debt in the airline's balance sheet had pushed equity value to negative at (-)Rs 32,000 crore and the option before the government was to either privatise or close it down.
Between 2009-10 and till now, the government has infused over Rs 1.10 lakh crore into the ailing airline.
This includes Rs 54,584 crore as cash support and Rs 55,692 crore as loan guarantee.
The government on October 8 announced that salt-to-software conglomerate Tatas have won the bid to acquire debt-laden national carrier Air India for Rs 18,000 crore.
This includes a cash payment of Rs 2,700 crore and taking over Rs 15,300 crore debt.
The deal, which is expected to be completed by December-end, also includes sale of Air India Express and ground handling arm AISATS.
As a precursor to Air India sale, the government in 2019 had set up a special purpose vehicle -- AIAHL -- for holding debt and non-core assets of the Air India group.
Four Air India subsidiaries -- Air India Air Transport Services Ltd (AIATSL), Airline Allied Services Ltd (AASL), Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India Ltd (HCI) -- along with non-core assets, painting and artefacts, and other non-operational assets, was transferred to the SPV.
Photograph: Regis Duvignau/Reuters