Patel asks Cabinet to take a call on Air India wage cuts

Ahead of Cabinet meet,tries to protect the airline from being declared sick.

Civil Aviation minister Praful Patel,who held a series of meeting with the governments senior leadership,to canvas support for Air India,has another hurdle to cross ahead of the Cabinet meeting tomorrow. He is scheduled to meet Heavy Industries and Public Enterprises (HIPE) minister Vilasrao Deshmukh prior to the meeting to seek his ministrys support.

The Department of Public Enterprises (DPE) has raised an objection to the ministrys proposal stating the airline has incurred losses for the last three years,and hence qualified to be declared sick. The HIPE ministry has contended that the company should have informed the Board for Industrial and Financial Reconstruction (BIFR). Air India has rejected DPEs contention. National Aviation Company of India Limited (NACIL),formed after merging Air India and Indian Airlines,was registered three years ago. Under the BIFR rules,a company which is filing for a sick status,must have been registered for at least five years,a civil aviation ministry official said.

In its proposal to the Cabinet,the ministry has sought Rs 1,200 crore additional equity support and passed on the onus of taking a decision on wage restructuring to the Cabinet. Accepting that AI had made little progress in tweaking wages and allowance due to the probability of industrial unrest,it said that the AI management be allowed to renegotiate agreements with unions to ensure the anticipated savings on employees cost.

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AIs wage costs comprise 17 percent of its overall operating costs which is much higher than the carriers competitors. It is therefore necessary to renegotiate the legacy union agreements on wages,salaries and allowances including performance linked incentives to bring about rationalisation and harmonisation, the proposal said,without giving any details on the quantum of cuts.

Post-merger,Air India lost Rs 2,226 crore in 2007-08,Rs 7,189 crore in 2008-09,and Rs 5,551 crore in 2009-10. A group of ministers,under finance minister Pranab Mukherjee,was set up to oversee its financial restructuring and implementation of a turnaround plan.On Thursday,government is likely to take a call on Air Indias proposal for Rs 1,200 crore equity infusion,wage rationalisation and operationalisation of its Strategic Business Units.

Patel held a series of meetings with the Prime Minister,Finance minister and Planning Commission to garner support for the proposal earlier in the month. The PMO and the finance ministry have extended their support to the proposal,said the official. The finance and home ministries had earlier raised objections to further equity infusion on the grounds that the carrier had failed to meet some of the crucial milestones as stated in the turnaround plan.

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