So it's landed. India’s civil aviation ministry which runs financially crippled airline Air India has reportedly asked for a handout of Rs 6,500 crore ($1.3 billion) to keep the sinking national carrier afloat. SPR has been predicting for several weeks now that with over Rs 44,000 crore ($9.7 billion) of loans outstanding and accumulated losses of Rs 22,000 crore ($4.8 billion), it was a matter of time before a hand would be dipped into the public purse.
State-owned banks such as Bank of Baroda, Bank of India, Central Bank of India and Oriental Bank of Commerce are the airline’s key lenders and represent close to 70% of its loan exposure. So that’s another area of concern. Interestingly, the Supplementary Demand for Grants for Expenditure of the Central Government, 2001-12 has very few references to an out-of-budget payment to Air-India.Rather, it refers to only a little over Rs 400 crore ($96 m) to be paid by the Government to settle past bills, mostly for using Air-India’s aircraft for 'VVIP’ flights. India’s Prime Minister usually commandeers an Air-India aircraft for international travel as the Government does not own the equivalent of an Air Force One.

MTNL’s Unbalance Sheet

The other state-owned though publicly listed organisation that could soon turn up with a begging bowl is telecom major MTNL. Sales have been dwindling for the last five years. From Rs 5,568 crore ($1.23 billion) in March 2006, they went to Rs 3,657 crore ($812 m) in Mar 2010.

For the same year i.e. 2010, losses stood at Rs 3,064 crore ($680 m). Why? Because employee costs shot up from Rs 2,065 crore ($458m) in March 2009, to a staggering Rs 4,869 crore ($1.08 bn) in March 2010. MTNL thus has the unique distinction of employee costs being higher than company sales.

And it’s not looking much better right now. For the first quarter of 2011-12, staff costs stood at Rs 847 crore ($188 m) while total losses were Rs 850 crore ($188.8 m). The good news could be that MTNL’s employee strength continues to come down, from 61,967 in 1998-99, its down to 43,311 in 2010-11. Remember that MTNL (which serves only Mumbai and Delhi) has a total subscriber base of 8.9 million for wireline and wireless connections and 2.4 million internet connections. India’s total subscriber base is over 846 million, which includes wireline and wireless.

India Spend

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