"We will ensure that ModiLuft flies only after paying the dues it owed when it was grounded. ModiLuft has been asked to sign an undertaking that it will clear its dues of around Rs 60 crore prior to its relaunch," civil aviation secretary Ravindra Gupta said on the sidelines of a seminar here. ModiLuft has envisaged an initial investment of Rs 30 crore for its relaunch, Gupta added. The aircraft acquisition committee of the civil aviation ministry had last week cleared the import of five Boeing 737-400 aircraft by ModiLuft. ModiLuft, which took to the skies in 1993, suspended operations in November 1996 after the collapse of its technical tie-up with German airline Lufthansa.

ModiLuft had fought a bitter court battle with Lufthansa for possession of the aircraft which it operated at that time.

ModiLuft promoter SK Modi has been planning the airline's relaunch for the last two years.

His re-entry into the industry has generated considerable interest in the domestic airline sector. A release issued on Saturday said that the airline had received a no-objection certificate (NOC) from the civil aviation ministry to operate as a scheduled domestic airline, and that it was all set to re-launch local operations from June 2000. The process of identifying and inducting suitable aircraft has been initiated.

The company also stated that it had received approvals from the ministry of commerce and industry - department of industrial policy promotion, secretariat for industrial assistance, for foreign equity participation by means of issue of cumulative convertible or redeemable preference shares.The revival plan envisages a funding requirement of $ 35 million for the induction of 12 to 18 aircraft over a period of two years. This entire funding has already been committed by means of a combination of debt equity, the release added.

The collapse of ModiLuft was treated as an indicator of the high-cost, high-risk nature of the civil aviation industry. Several other airlines which began after the Open Skies Policy of the Government in 1991 such as Damania Airways did not make the grade despite a flying start in the industry.

On the flip side, private players including Jet Airways and Sahara Airlines have written success stories in domestic civil aviation, forcing market leader Indian Airlines (IA) to pull up its socks. Jet Airways now has a fleet of 27 aircraft as against IA's 54-aircraft strong fleet.