US aircraft maker Boeing and state-owned Air India is said to have reached a

RELATED ARTICLES India sees business opportunity in Iran after US, EU sanctions Oil firms stop jet fuel supplies to Air India over dues Airport Authority says Air India owes 12b rupees Protectionism to hurt both US and India, warns Pranab HCL to create 10,000 jobs in US, Europe over 5 years

truce as part which the American company is likely to fork out $840 million (Rs 3,919 crore) as compensation for delaying the delivery of 27 Boeing 787-800 Dreamliner aircraft.

The compensation has apparently been agreed upon after intense negotiation between the two sides, an aviation ministry official said on condition of anonymity.

The top brass of Boeing and Air India have been negotiating far a long time. As per the original agreement signed by the two in 2006, Boeing was allowed a grace period of one month to supply aircraft.

The US aircraft maker had undertaken to shell out $15,000 per day and up to $25 million per aircraft for delay. Air India had been pressing for $30,000 per day and up to $50 million.

“Renegotiation has been going on for long. Last year, Air India chairman Arvind Jadhav had asked for $710 million for the delay. The idea is to get compensated for additional cost that the carrier would have to bear by leasing more aircraft for this year’s schedule,” a civil aviation ministry official close to the development said.

Air India had ordered 27 Dreamliners and their delivery was scheduled to start in May 2008. This has been extended to the second quarter of 2011.

Another official said the US aircraft manufacturer might agree to the amount even though it is much more than the original commitment of $145.8 million. “Both of them are important to each other. Air India has been the biggest customer for Boeing in India. They would not want the orders to be cancelled and may agree to pay the amount demanded by the carrier,” the official said.

Also, pressure seems to be mounting on Boeing due to stiff competition. While Boeing’s main customers in India include Air India and SpiceJet, its closest competitor Airbus has IndiGo and Kingfisher as its loyal customers.

But Boeing’s chief in India, Dinesh Keskar, said there was no such pressure. “There is no pressure on us. We are doing business across the world. This is one of the most successful planes and it is going to make a big change in the aviation industry. We have so far sold 156 aircraft across the world, and that has never happened in history. There is no competition from anyone,” he said, without giving details on the compensation.

Keskar had recently agreed that the national carrier was “certainly eligible” for compensation.