NEW DELHI, May 16: The cash-strapped Air India (AI) is banking on the expertise of its two businessmen board members, RPG group vice-chairman Sanjeev Goenka and Housing Development Finance Corporation (HDFC) chairman Deepak Parikh, to mobilise funds.

Goenka and Parikh are the only non-government members in the four-member committee set up by Air India to suggest ways of raising money. Civil aviation ministry joint secretary Anil Baijal and Air India managing director Brijesh Kumar are the other nominees on the panel. The committee was constituted by the AI board of directors on Thursday.

The airline needs resources primarily to fund the proposed induction of medium capacity long range (MCLR) aircraft at a cost of Rs 3,700 crore.

"The sub-committee will explore ways to finance fleet expansion and other requirements," AI managing director Brijesh Kumar told The Financial Express. Though Airbus and Boeing have promised to assist AI in securing loans from foreign consortia of banks in case their respective bids for the MCLR contract were accepted, the airline is not enamoured of the suggestion. There is a feeling in the AI circles that servicing a foreign loan will be unaffordable. The top brass is of the opinion that expansion of equity, following a divestment of government stake is the most viable option. AI, a 100 per cent government-owned airline, is already paying a heavy cost on foreign borrowings and does not want to compound its problems.

"There have been no efforts to induct new aircraft in the fleet for the past several years. We are noe saddled with an old fleet, and very few options to fund expansions," a senior AI official said.

AI recently decided to raise Rs 350 crore in foreign currency loans for working capital needs since the airline's reserves dwindled from Rs 1100 crore to Rs 300 crore.

It has already taken a Rs 2,300-crore loan for induction of six Boeing 747-400 aircraft in the last two years. A large chunk of reserve funds have been diverted as interest repayment on the borrowing. AI will have to shell out Rs 750 crore as interest charges for the loans raised.

However, the top brass realises that the government disinvestment is a politically sensitive issue and may prove to be difficult under a Left-backed coalition government.

The airline is exploring the option of private debt placement in the domestic market as a cheaper alternative to foreign borrowings.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.