India's tax officials have frozen 11 bank accounts of Kingfisher Airlines (KING.NS) and 10 of Air India AIR.UL earlier this month as they have failed to pay their service tax dues, an official from the Mumbai service tax department said on Friday.

Kingfisher

Kingfisher

State-run carrier Air India owes the department 1.5 billion rupees, while India's third largest airline Kingfisher owes the department 700 million rupees for the April-August period, said S.K.Solanki, commissioner of service tax (zone 1, Mumbai commissionerate) of the Central Board of Excise and Customs.

Service tax is an indirect tax which is imposed on services called taxable services.

Many Indian carriers including state-run Air India are troubled by rising fuel costs and price wars emanating from intense competition causing investors and government to worry about their survival.

The Vijay Mallya-owned Kingfisher is desperately scouting for funds from potential investors and more cushion from its banks to keep afloat.

Shares of Kingfisher Airlines fell over 5 percent in early trades on Friday.

Most likely the Air India accounts maybe opened today as they have promised to pay 8 crores (80 million rupees) by Monday, Solanki said. Kingfisher has still not got back to us.

An Air India spokesman said the airline has made part payment and the accounts are in the process of being defreezed, while a Kingfisher spokesman declined to comment.

Bank accounts for Kingfisher Airlines were frozen for two days in November as well, but were subsequently opened up after the airline promised to pay the dues, Solanki said.

Kingfisher, whose current debt stands at over 65 billion rupees, has a negative networth. It aims to cut debt to 37.2 billion rupees through sale and lease back of aircraft, sale of a property in Mumbai and conversion of rupee loans into lower interest foreign loans.

Air India, whose financial restructuring plan was approved by a consortium of lenders, includes extension of the tenure of about $4 billion of working capital loans as well as converting some of the loans into equity.