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Kingfisher Airlines, Air India bank accounts frozen by Mumbai service tax dept over dues
December, 08th 2011

Kingfisher owes Rs 70 crore to the Mumbai service tax department.
Several bank accounts of cash-strapped Kingfisher Airlines and Air India have been frozen by the Mumbai service tax department for non-payment of dues.

The Vijay Mallya-owned Kingfisher Airlines owes Rs 70 crore to the service tax department while national carrier Air India is due to pay Rs 100 crore.

Both the airlines defaulted on paying service tax despite collecting it from its flyers.

Officials said actions had to be initiated against the airlines because they failed to clear their dues in the "sufficient time" given to them.

This is the second time that Kingfisher's account has been frozen in the last two months. The account was first frozen for two days in the first week of November and it was only after getting an assurance from Kingfisher officials that they would deposit the due amount in three installments that the service tax department lifted its order.

The Mumbai Airport authorities (MIAL) on December 1 had threatened to put Kingfisher Airlines on a cash-and-carry mode again from December 3 if the carrier fails to pay up the dues of around Rs 90 crore.

The state-run Airport Authority of India had also threatened to put the airline -- which is sitting on a debt of over Rs.12,000 crore -- on cash-and-carry mode.

The airline owes Rs 240 crore to national airports operator and the move reportedly came, according to an official, after a cheque issued by Kingfisher bounced.

Kingfisher is struggling to meet its working capital needs, and has sought relief from lenders. It owes close to Rs 7,060 crore to 14 banks, and they are currently assessing the viability of the airline.

Kingfisher reported a net loss of Rs 469 crore for the September quarter, though there was a 10.2 per cent rise in revenues at Rs 1,528 crore, on account of massive spike in aviation fuel prices, and inability to hike fares due to the competition.

According to industry experts, the airlines are currently selling tickets at Rs 900 discount per seat.

Air India is also reeling under huge losses.

The total debt of Air India, consisting of aircraft loans and working capital loans aggregates to Rs 43,777.01 crore. The working capital loan is Rs 21,511.10 crore while the aircraft loan is Rs.21,412.06 crore, figures of last month show.

Seeking to turnaround ailing Air India, government is considering a nearly Rs 30,000 crore package for the national carrier over a period of 10 years.

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