Govt Should Bail Out Kingfisher Airlines, Says ASSOCHAM
By IBTimes Staff Reporter | November 27, 2012 12:22 AM EST
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has demanded that the government rescue the debt-ridden Kingfisher Airlines in the same way that Air India was bailed out when it met with similar crisis.
Kingfisher flights were completely grounded since October 1, following a strike by the airline's engineers and pilots over non-payment of their salaries since March this year.
Welcoming Life Insurance Corporation of India (LIC) and Employee Provident Fund Organisation (EPFO) subscribing to Rs 7,400 crore debt issue of Air India as part of the government's bailout plan for the state-owned airlines, the ASSOCHAM has demanded a similar bailout for the Kingfisher Airlines.
"While Air India deserves to be given a bailout package, there is no reason why Kingfisher Airlines should be treated differently when it comes to lending agencies, banks and even the government organizations," said Mr Rawat, ASSOCHAM Secretary General, in a statement.
Of Rs 7,400 crore issue, the LIC is subscribing Rs 3,000 crore and EPFO Rs 4,400 crore. On its part, the government has announced Rs 30,000 crore bailout plan to revive Air India.
The Vijay Mallya-owned carrier is encumbered with a loan amount of ₹70 billion in 17 banks and has most of its bank accounts frozen, causing disruptions in flight schedules. The total debt load reportedly stands at $1.4 billion.
"Both private and the public sector companies operate in a similar environment. As the largest shareholder, it becomes incumbent on the Government to safeguard its PSUs. But at the same time, the banks and other financial institutions should not discriminate against the private sector firms. To the extent additional equity from the main promoters, the UB group is required, we would urge them to bring in these funds so that the lenders' comfort level is increased," the apex chamber said in a media statement.
Kingfisher Airlines has not started its operation in spite of resolving the problem with its striking workers last month, as the Directorate General of Civil Aviation (DGCA) has not given the green signal to begin operations.
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