The government has taken away Rs 29,000 crore of Air India's massive debt burden of Rs 55,000 crore to a special purpose vehicle (SPV) in an attempt to clean its balance sheet, said Rajiv Nayan Choubey, secretary, civil aviation ministry.

"We are providing a partial but significant relief to Air India," Chaubey told reporters on Thursday.

In September, CNBC-TV18 had reported quoting sources that the government has decided to transfer Rs 29,464 crore of Air India's debt to a special purpose vehicle (SPV) to clean up the distressed carrier's balance sheet.

Choubey said that the debt taken up by the government will be serviced by sale proceeds from the auction of non-core real estate properties of Air India.

Since the transfer of debt will need restructuring of loans, the carrier has to be in discussions with the lenders for a smooth transition. However, Choubey added that in case the restructuring exercise faces hurdles, the government may look at asking the special purpose vehicle to raise money by monetisation of non-core assets and other means to pay off lenders.

The divestment of the ground handling arm, Air India Air Transport Services Ltd, will be done on behalf of the special purpose vehicle, the Air India Asset Holding Company, and it will be soon transferred to that, he said.

Choubey also added that the aviation ministry has asked Air India to undertake measures to increase savings and as a result, revenue enhancement and cost-cutting measures are likely to result in savings of nearly Rs 2,000 crore per year.

The measures can be seen as an attempt to make the airline attractive for investors as the government has consistently said that it remains committed to divestment of the carrier.

The government had failed to receive even a single expression of interest during the divestment process initiated on March 28, under which 76 percent stake in Air India was at stake.

The government has been infusing equity into the carrier since 2012 in order to help the airline pay all government-guaranteed aircraft loans and interest.

At the same time, a financial restructuring plan was also implemented under which high-cost working capital loans were converted into long-term debt, carrying lesser rates of interest.

Under a turnaround plan approved in 2012, the airline was required to generate Rs 5,000 crore over a period of 10 years starting March 2012 by monetising its assets.

The turnaround plan includes budgetary support amounting to Rs 30,231 crore spread over 10 years till March 2021 and equity support for payment of principal or interest of non-convertible debentures.

First Published:Nov 29, 2018 6:41 PM IST