However, the sanctions clearly stipulate that credit guarantees by US-Exim and Overseas Promotion of Overseas Corporation (OPIC) will not be made available to India. This means that the US Exim will not be involved in the purchase of Boeing aircraft by any Indian company. Normally, the bank provides guarantee of up to 85 per cent of the cost to buyers against which fund-raising becomes easy. The scope of sanctions also includes suspension of sale of articles of defence, including spare-parts, to be used in defence aircraft. However, as there are spare-partscommon to civil aircraft, it is not clear how the restrictions will be imposed.

The dowgrading by Moody's will make it difficult for Air-India to raise debt from other sources. The airline has been considering induction of additional medium capacity long range (MCLR) aircraft in its fleet for over three years now. Initially, it was planning to purchase 23 aircraft in a phased expansion programme, but later decided to prune the number. Currently, Air-India operates over 25 aircraft.

The two leading international aircraft manufacturers, Boeing and Airbus Industrie, have been pitching hard to bag this large contract. While taking the decision of the aircraft purchase deal, Air-India needs to examine the possible funding options. The company is evaluating various options to improve its financial status. Though the budget did not make any specific announcements on Air-India's privatisation, like Indian Airlines, various governments have been exploring the option of divesting their holding in Air-Indiaalso.

The most important agenda is the airline's restructuring programme being undertaken by a committee headed by Vijay Kelkar, former secretary in the ministry of petroleum and natural gas. The report, which will be submitted in a fortnight, is expected to focus on several issues like privatisation of AI and the funding needed.