Budget gave ₹51,971 crore to repay Air India’s debts

A significant part of the spending in the Union Budget 2022 has been earmarked towards clearing the debts of the national airline Air India, which the government recently sold to the Tata group.

The government set aside ₹51,971 crore as part of the outstanding guaranteed liabilities of Air India and its other “sundry commitments”.

“As against a total expenditure of ₹34.83 lakh crore projected in the Budget Estimates 2021-22, the Revised Estimate is ₹37.70 lakh crore. The Revised Estimate of capital expenditure is ₹6.03 lakh crore. This includes an amount of ₹51,971 crore towards settlement of outstanding guaranteed liabilities of Air India and its other sundry commitments,” Finance Minister Nirmala Sitharaman said during her Budget speech.

After several divestment attempts over the last few years, the government sold Air India to Tata for ₹18,000 crore. The deal which was closed on January 27 involves Tata taking ₹15,300 crore of the airline’s debts. After this, the country’s oldest conglomerate paid the government of India ₹2,700 crore and acquired 100% stake in the company.

However , a key part of the deal involves the government clearing a huge pile of debt of Air India accumulated over the years as the company was running in losses.

To service the debt, a special purpose vehicle (SPV) — AI Asset Holding — was set up and given ₹62,057 crore, of which ₹36,254 crore was paid towards past government-guaranteed borrowings of Air India.

As much as ₹12,357 crore was used to pay for borrowings for sale and leaseback rentals for aircraft; and ₹13,446 crore for repayment of other dues and liabilities.

The government had tweaked the bidding conditions to allow potential buyers to decide how much debt they would want to take on.