India’s national carrier Air India has reportedly sought a loan worth over Rs 1,100 crore for modification of two Boeing aircraft scheduled to be acquired next month to ferry VVIPs.
The two Boeing 777-300 ER aircraft are expected to be delivered to India in January next year and the the Air India will need $180 million (Rs 1160 crore in Indian currency) to modify the interiors of the planes. The two planes, according to a report by PTI, will be used to carry VVIPs, such as Prime Minister, President and Vice President.
In its tender document issued last week, Air India said, “Government of India has indicated that they would issue its guarantee for the financing cost of modification of the two B777-300 ER aircraft for a period of 12 months or less.”
According to the airline, no commitment fee would be paid to the lender for the USD 180 million loan. “Prepayment/ short closure of the loan should be allowed without any extra cost to Air India as the loan would be repaid as soon as the funds are made available by Government of India,” it added.
“The Indian Income Tax Act imposes withholding tax on interest payments to lenders outside India. The rate of withholding tax on interest payments will be considered in financial evaluation of the offers to determine the all-in cost of your offer,” the document said.
Last month, Air India had sought the loan of Rs 3,450 crore to fiance the acquisition of these two planes taking the total cost of buying the two planes just to ferry three VVIPs to over Rs 4,600 crore. This despite the fact that Air India has a debt burden of more than Rs 50,000 crore and these loans would further increase the debt level.
In 2006, Air India placed orders with Boeing for 68 aircraft 27 Dreamliners, 15 B777-300 ERs, eight B777-200 LRs and 18 B737-800s. Of these, the state-run carrier has already taken the delivery of 65 planes. At present, the flagship airline has a fleet of 115 aircraft.
The government is in the process of finalising the modalities for the strategic disinvestment of debt-laden Air India as part of efforts to revive the carrier.
The move will infuriate those campaigning to end the VVIP culture in India, a country suffering from severe poverty and economic crisis. The government has already decided to privatise Air India because of its financial woes.