Oil cos snap fuel line to AI, resume after govt steps in
Chandigarh   11-Aug-2011

State-run oil marketers IOC, HPCL and BPCL on Wednesday stopped supplying jet fuel to struggling carrier Air India to force the company to clear its dues, but resumed supply later in the evening after the government intervened, executives in oil firms said.

According to an industry source, IOC stopped supplies briefly after 4 PM on Wednesday, but resumed supply by about 7.55 PM. Earlier in the day, IOC said it had stopped giving jet fuel on credit to Air India, which can buy fuel only on cash payment.

“We have kept fuel sales to Air India on a cash and carry basis,” IOC chairman RS Butola told reporters around 3.30 PM, implying the company can purchase fuel only on immediate payment. Private airlines barring Kingfisher, however, continue to enjoy fuel supply even on credit thanks to their good credit history.

The decision to put the payments on cash-and-carry is based on commercial wisdom and Air India could clear its dues and make timely payments to enjoy the privileges as before, Butola said. The supply was resumed after Air India agreed to pay pay its daily dues from Thursday.

In June, the government asked oil firms to meet Air India’s requirements for three months to allow it to carry out daily operations after civil aviation minister Vayalar Ravi met petroleum minister S Jaipal Reddy to sort out the issue.

Due to the fuel supply restrictions, the airline was then being forced to combine and even curtail 10-15% of its flights every day. It runs an average of 320 flights daily.

Air India was awaiting release of funds sanctioned by the government as well as from some banks, sources said.