PSU OMCs constrained to stop fuel supply to Air India at six airports; Mounting dues impacting working capital requirements of OMCs

Mumbai: PSU Oil Marketing Companies (OMCs – IOC, BPC and HPC) have been constrained to suspend supply of jet fuel to Air India and Alliance Air flights at six airports from the evening of 22nd August 2019 due to mounting outstanding dues from the airline and their ramifications for their working capital requirements.
The joint decision to stop fuel supply to Air India from six airports, i.e., Kochi, Mohali, Pune, Ranchi, Patna and Visakhapatnam, was taken by the OMCs in the wake of long overdue payments to the tune of Rs. 5,000 crore. This includes the interest accrued on the outstanding dues.

Vide letter dated 14th August 2019, the Air India management was intimated by the PSU OMCs regarding their decision to stop fuel supplies at the aforementioned airports w.e.f. 22nd August 2019. Air India uplifts about 250 kilolitres (kl) of ATF at the above six airports on a daily basis.

The three PSUs had served similar notices on Air India earlier but withdrew them subsequently and continued with ATF supplies on the assurance of Air India management that the outstanding dues will be cleared at the earliest. However, despite repeated follow-up and reminders for payment by the OMCs, no major reduction in the outstandings materialised from the airline till date. That too after the ATF prices have climbed down from a high of Rs. 76,378 per kilolitre (kl) in November 2018 to Rs. 63,295 per kl currently.

As per the commercial terms agreed upon, Air India enjoys a credit period of 90 days. However, the credit period has since crossed the limit and has been at about 230 days for the past nearly two years. Despite this, the OMCs have been supportive of Air India throughout this period.

Considering the huge outstandings from Air India and their ramifications for their working capital requirements, the three OMCs have been constrained to take the decision of stoppage of fuel supply at six airports. However, Air India flights operating from the six airports, where ATF supplies have been suspended, have been tanking up from other airports.

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