The Petroleum and Natural Gas Ministry has asked Hindustan Petroleum Corporation Ltd. (HPCL) to invoke the corporate guarantee given by the Vijay Mallya's United Breweries (UB) Group to recover dues pending against Kingfisher Airlines and supply aviation turbine fuel (ATF) in future only against a bank guarantee.
In a letter to HPCL, the Ministry has asked the company to convene a ‘special board meeting' to consider among other things invoking UB Group's Rs.250-crore corporate guarantee to recover part of Rs.602.05-crore outstanding. The outstandings were reported to be Rs.602.05 crore on March 4 with a security in the form of Rs.250 crore corporate guarantee from United Breweries and Holding Ltd (UBHL),'' the letter states. It asked HPCL to place KFA on cash-and-carry terms as is done by Indian Oil Corporation and Bharat Petroleum Corporation. Petroleum Ministry sources said normally ATF supplies like any other fuel sold in bulk were done against a bank guarantee to cover for the credit period. However, in the case of KFA, HPCL did not insist on a bank guarantee and settled for a corporate guarantee, which the Ministry felt, mighty be a worthless piece of paper that might not be encashed in case of default, the sources said. UBHL had last week issued a corporate guarantee of Rs.500-crore but the Ministry was unimpressed and was insisting on a bank guarantee. The Ministry also wants HPCL to adjust 50 per cent of the money received from KFA in future towards outstanding dues and 50 per cent towards current ATF supplies.