All Air India flights may be grounded by evening as oil companies refuse fuel

India’s beleaguered state carrier Air India has found itself facing yet another crisis after the three state-owned oil companies have refused to refuel some of its jets today.

It is reported that oil companies have imposed a cut of 20% on their supplies to Air India.

Air India was forced to cancel six of its flights, according to early leads, as the oil companies took the unprecedented step. Unless the government puts pressure on the oil companies, all of Air India’s flights could be grounded today itself.

Oil companies allege that the firm has not paid total of Rs 1200 crore in oil bill arrears.

Air India said talks are going on at the “highest levels” to resolve the matter as soon as possible. It believes that Kerala, from where 4 of the 6 cancelled flights were to originate, has been targeted by the oil companies to send a clear signal.

Air India had been on a ‘cash and carry’ agreement for fuels for the last three months. Under the scheme, Air India was no longer eligible for credit-based purchase of fuel and had to pay in advance before getting any fuel.

The three companies, Hindustan Petroleum, Indian Oil and Bharat Petroleum, have nearly all of the jet-fuel market in India between them, though private producers like Reliance too are in the market in some airports.

Private airlines too have big outstanding dues, but none of them have more than Rs 800 crore or so outstanding.

Air India, which has been going downhill for several years due to poor customer service and bumbling investment decisions, has recently started cutting fares drastically in an effort to get more fliers to hop on. Its sorry state is attributed to the sometimes willful neglect of the carrier’s health by government.