New Delhi, Jul 16 (IANS): Cash-strapped national carrier Air India is expected to generate Rs.7,400 crore (over $1,640 million) by issuing government-backed non-convertible debentures (NCDs) within the next three months, an official said.

The company has also started to scout for merchant bankers for the exercise, which is a part of the company's financial restructuring plan (FRP).

The union cabinet had approved the FRP along with a turnaround plan (TRP) of the airline in April.

"The process of issuing sovereign bonds had been initiated. We expect the process of be completed within three months from now," a senior Air India official told IANS.

"The issuance of bonds is a key feature of FRP and will provide us with financial relief in the long run. We will use the funds to pay some of our working capital loans."

The bonds will have a maturity period of 19 years and will be issued to financial institutions like banks, the Life Insurance Corporation and the Employees' Provident Fund Organisation by Sep 30.

The move is expected to provide financial relief to the company, which currently is reeling under accumulated losses and loans of around Rs.67,520 crore.

The company has taken Rs.21,200 crore as a working capital loan, Rs.22,000 crore worth of long-term loans for aircraft acquisition, Rs. 4,600 crore of vendor bills and an accumulated loss of Rs.20,320 crore.

In a bid to save the airline, the government in April approved its TRP and FRP, for which it will receive some Rs.30,000 crore in equity infusion over nine years.