Government to transfer Rs 29,464 crore of Air India's debt to special purpose vehicle

“During the meeting, it was further discussed that as this would require transfer of loans from one entity to another, approval from Reserve Bank of India (RBI) will be needed as this would comprise second restructuring,” another source added.

The airline, which had outstanding loans of over Rs 48,400 crore as on March 31, 2017, has now identified the list of loans that can be transferred to the special purpose vehicle, according to the sources.

Confirming the same, an aviation ministry official, said they have "incorporated the special purpose vehicle."

Earlier this month, the union civil aviation ministry had said that Air India has received Rs 2,100 crore of government guaranteed borrowing and around Rs 860 crore of equity infusion under the first tranche of financial support plan.

This aid was over and above the budgetary support and the turnaround plan for Air India.

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.

The airline has already received equity infusion of around Rs 27,200 crore till March.