Murli Deora (left) with Praful Patel in New Delhi on Wednesday. Picture by Ramakant Kushwaha

New Delhi, Oct. 22: The government today allowed airline companies to clear their outstanding fuel bills in six monthly instalments — free of interest charges — by March.

State-run oil companies also agreed to give the airlines a 90-day grace period to pay for their current fuel purchases, instead of 60 days now. Moreover, jet fuel tariff will be revised every fortnight instead of 30 days now to quickly pass on the benefit of falling international crude prices to the airlines.

The decisions were taken today at a meeting attended by petroleum minister Murli Deora, civil aviation minister Praful Patel, officials of the finance ministry, chiefs of oil PSUs and industry representatives, including Kingfisher chairman Vijay Mallya, Jet Airways executive director S.K. Dutta and Air India chairman Raghu Menon.

The cash-strapped airlines owe Rs 2,962 crore to the oil companies. “Measures taken today should ease the burden on the airlines a bit,” Patel said.

However, today’s arrangement did not go down well with many. According to Dinesh Trivedi, a member of the parliamentary panel on transport, “It’s a reward for airlines who have mismanaged their finances and a disincentive for airlines that are paying their jet fuel dues on time.”

Analysts said the deal was possible because it involved state-run firms. Private sector oil refiners such as Reliance Industries would never have accepted such an arrangement. “The government or oil refiners could well have asked for equity in lieu of interest forgone,” the analysts said.

Today’s meeting was called after carriers — Jet Airways, Kingfisher and Air India — defaulted on jet fuel dues and the oil companies threatened to stop further supplies. The airlines and the oil companies would get back to their commercial arrangements for the clearing of dues and fixing the grace period after the current arrangement expires in March next year.

Air India draws flak

The government today criticised Air India chairman Raghu Menon for considering a proposal to offer 15,000 employees leave without pay for three to five years. It also cautioned other private airlines against laying off employees.