The Union Budget has allocated INR 10,667 crore for the civil aviation ministry for 2022-23, according to the document presented by Finance Minister Nirmala Sitharaman on Tuesday, February 1.
Out of the total allocation, INR 600.7 crore has been earmarked for the regional connectivity scheme UDAN (Ude Desh ka Aam Naagrik), while INR 9,259 crore goes to AI Asset Holdings Limited for servicing the loans transferred to the special purpose vehicle (SPV) for the financial restructuring of Air India.
An amount of INR 165 crore has also been set aside for the medical benefits of retired Air India employees, the Budget document said.
Air India was taken over by Tata Group firm Talace on January 27. Through a competitive bidding process, the government sold loss-making Air India to Talace for INR 18,000 crore. As part of the deal, Talace paid INR 2,700 crore in cash and took over the INR 15,300 crore debt of the airline. The remaining debt and borrowings of Air India were transferred to AIAHL.
As of August 31, 2021, Air India had a total debt of INR 61,562 crore. The airline also had about INR 15,000 crore excess liabilities towards unpaid fuel bills and other operational creditors.
According to the budget document, the government infused INR 36,254 crore in AIAHL during 2021-22 “for repayment of past government-guaranteed borrowings of Air India Limited”.
Further, the government put in INR 12,357 crore equity in AIAHL in 2021-22 “for repayment of past government-guaranteed borrowings (lease rental for aircraft) of Air India Limited”, as per the document.
Last fiscal, it also infused Rs 13,446 crore equity in AIAHL for repayment of past dues/ liabilities of Air India. The total equity infusion in AIAHL was Rs 62,057 crore in 2021-22.
In 2021-22, the civil aviation ministry was allocated INR 3,224 crore, however, the government incurred high expenses during the divestment of Air India and, as a result, the revised expense for the civil aviation ministry during 2021-22 stood at INR 72,652 crore.
Out of the total revised figure for 2021-22, the allocation towards Air India loans, grants in aid to Air India for cash losses during the COVID period and towards Air India Assets Holding Company for re-payment of dues and borrowings of the airline stood at INR 68,501 crore.
In the Budget for 2021-22, the government had allocated INR 600 crore for the UDAN scheme, but the total expenditure rose to INR 994 crore.
While the finance minister did mention that airports would power the economic growth as a part of the PM Gati Shakti programme, she did not share any details on how this would be achieved.
The government also did not come out with any measures such as a cut in the excise duty charged on aviation turbine fuel, to help airlines grappling with high operating costs.
Budget carrier IndiGo termed the Union Budget 2022-23 as “growth-oriented” while expecting a cut in the excise duty on jet fuel. Ronojoy Dutta, Whole-Time Director and CEO, IndiGo said that they were expecting tax concessions to the aviation industry in the form of a cut in ATF (Aviation Turbine Fuel) excise duty and the allocation of concessional finance to airlines to help us come out of the pandemic.
To make things trickier, the Indian government announced a price hike on ATF by up to 8.5%, just ahead of the budget. ATF price has gone up to INR 86,038.16 per kiloliter (kl) in the national capital region, the highest ever. Price hikes like these are usually passed down to passengers, reflecting on their ticket prices.