HPCL encashes KFA bank guarantee for oil dues

HPCL encashes KFA bank guarantee for oil dues

Last Updated: Wed, Oct 24, 2012 06:29 hrs
Outrage against petrol price hike

Kingfisher Airlines tryst with bad news continues. Hindustan Petroleum Corporation Ltd (HPCL), to which Kingfisher Airlines owed crores in jet fuel dues, has encashed the bank guarantee provided by the airline.

Kingfisher's bank guarantee to HPCL was worth about Rs 434 crore. Till September, the airline owed Rs 341 crore to HPCL in fuel dues. A senior executive at HPCL's finance department said the company had already encashed the bank guarantee.

"With the aviation regulator suspending Kingfisher's flying licence, we decided we had to make use of the bank guarantee provided to us by the airline. We have been able to cover the dues," the executive added.

On Tuesday, the HPCL stock closed at Rs 300.95, up 0.33 per cent.

Last month, B Mukherjee, director (finance), HPCL, told Business Standard Kingfisher owed the company about Rs 341 crore, adding if Kingfisher failed to pay the dues, HPCL had the option of encashing the bank guarantee.

HPCL is Kingfisher's largest supplier of aviation fuel. In March, HPCL had snapped fuel supplies to Kingfisher, owing to non-payment of dues. While IndianOil's supplies to Kingfisher are negligible, Bharat Petroleum Corporation (BPCL) sells fuel to the airline on a cash-and-carry basis at select airports.

Airlines say rising fuel and capital costs, coupled with competition-induced price wars, have led to huge accumulated losses and mounting debts. Till last month, Air India owed about Rs 300 crore each to BPCL and HPCL. It also owed Rs 1,250 crore to IndianOil, according to officials from these companies. Air India hasn't provided bank guarantees to any of the oil marketing companies.

"Air India is unable to pay even after a 90-day credit period. As of September, it owed us about Rs 400 crore," said a BPCL official.

Of its dues of Rs 1,900 crore to IndianOil, so far, Air India has paid about Rs 650 crore. An IndianOil executive said Air India had settled part of its dues. "The balance remains to be settled," the official added.

Some of Air India's dues to IndianOil were settled through fund infusion of Rs 6,750 crore into the company. In April, the government had announced it would infuse additional funds of Rs 30,000 crore into the airline through the next nine years.

Till early this year, Air India owed over Rs 4,170 crore to public sector oil companies in unpaid jet fuel bills.

This February, the three oil marketing companies had stopped supplying fuel to Air India for failing to make payments.

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