So it's landed. India’s civil aviation ministry which runs financially crippled airline Air India has reportedly asked for a handout of Rs 6,500 crore ($1.3 billion) to keep the sinking national carrier afloat. SPR has been predicting for several weeks now that with over Rs 44,000 crore ($9.7 billion) of loans outstanding and accumulated losses of Rs 22,000 crore ($4.8 billion), it was a matter of time before a hand would be dipped into the public purse.
State-owned banks such as Bank of Baroda, Bank of India, Central Bank of India and Oriental Bank of Commerce are the airline’s key lenders and represent close to 70% of its loan exposure. So that’s another area of concern. Interestingly, the Supplementary Demand for Grants for Expenditure of the Central Government, 2001-12 has very few references to an out-of-budget payment to Air-India.Rather, it refers to only a little over Rs 400 crore ($96 m) to be paid by the Government to settle past bills, mostly for using Air-India’s aircraft for 'VVIP’ flights. India’s Prime Minister usually commandeers an Air-India aircraft for international travel as the Government does not own the equivalent of an Air Force One.

MTNL’s Unbalance Sheet

The other state-owned though publicly listed organisation that could soon turn up with a begging bowl is telecom major MTNL. Sales have been dwindling for the last five years. From Rs 5,568 crore ($1.23 billion) in March 2006, they went to Rs 3,657 crore ($812 m) in Mar 2010.

For the same year i.e. 2010, losses stood at Rs 3,064 crore ($680 m). Why? Because employee costs shot up from Rs 2,065 crore ($458m) in March 2009, to a staggering Rs 4,869 crore ($1.08 bn) in March 2010. MTNL thus has the unique distinction of employee costs being higher than company sales.

And it’s not looking much better right now. For the first quarter of 2011-12, staff costs stood at Rs 847 crore ($188 m) while total losses were Rs 850 crore ($188.8 m). The good news could be that MTNL’s employee strength continues to come down, from 61,967 in 1998-99, its down to 43,311 in 2010-11. Remember that MTNL (which serves only Mumbai and Delhi) has a total subscriber base of 8.9 million for wireline and wireless connections and 2.4 million internet connections. India’s total subscriber base is over 846 million, which includes wireline and wireless.