GoFirst owes Indian Oil more than Rs 5 billion.Image Credit source: File Photo
Budget airlines GoFirst, which has declared ‘bankruptcy’, owes huge dues to Indian Oil Corporation. The arrears of jet fuel i.e. oil on the company is more than 5 billion rupees. The country’s largest fuel company Indian Oil has now found a way to recover it.
Indian Oil is the only company providing jet fuel to GoFirst. On Tuesday, GoFirst declared itself ‘bankrupt’. GoFirst attributed this to the faulty Pratt & Whitney engines. Now the NCLT will hear the company’s application on May 4.
See also: How Go First reached the brink of drowning, understand from this explainer
Money will be recovered from bank guarantee
Airlines in the country usually pay for jet fuel in the form of bank guarantees. GoFirst has also provided a bank guarantee to Indian Oil for payment of fuel. With GoFirst going into bankruptcy process, Indian Oil has approached banks to encash bank guarantees of around Rs 5 billion.
According to the news of Reuters, the banks have also accepted the same. This bank guarantee was issued by the public sector Bank of Baroda and Central Bank of India for the fuel payment of Go First.
See also: Go First will not only sink, government banks can also sink more than 6000 crores
No bank guarantee of 50 crores
In the last two to three months, Indian Oil had sold jet fuel worth about Rs 50 crore to GoFirst without any bank guarantee. The sale was done after GoFirst had exhausted its credit limit. However, it is not yet clear why Indian Oil sold such amount of fuel to GoFirst without any bank guarantee. Indian Oil is hopeful that it will get this payment as well.
Sources associated with Indian Oil say that the bankruptcy case of GoFirst is not due to any kind of governance failure, but it is due to the bad engine of the company’s planes. That’s why Indian Oil is expecting this money to come out. At present, no response has been given by Indian Oil, Bank of Baroda, Go First and Central Bank of India in this regard.