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AI to recast debt, start wage talks as Rs 1,200 crore equity comes in

AI to recast debt, start wage talks as Rs 1,200 crore equity comes in
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First Published: Thu, Dec 30 2010. 10 47 PM IST
Updated: Thu, Dec 30 2010. 10 47 PM IST
Mumbai: The government on Thursday approved an infusion of Rs 1,200 crore as equity in Air India Ltd and asked the flag carrier to revise its wage structure, which accounts for a large chunk of its expenses.
The decision of the cabinet committee on economic affairs opens the way for Air India to begin debt restructuring and engage in fresh talks with representatives of its 31,000 employees.
Chairman and managing director Arvind Jadhav said he will begin harmonizing the salaries of original Air India employees and those who came to Air India after its merger with Indian Airlines in 2007.
“We have got equity support from the government. And now we will start looking at legacy agreements of all Air India employees in 90 days to have common productivity-linked norms in order to turn around the carrier,” Jadhav said.
The aviation ministry said in a statement the money would provide Air India’s revival plan a much-needed impetus.
Air India approached the committee of secretaries (CoS), set up by Prime Minister Manmohan Singh, in August 2009 seeking Rs 10,000 crore as equity infusion, largely to service debt. The CoS recommended a cash infusion of Rs 5,000 crore over three years, beginning in 2009-10.
The government released Rs 800 crore in February.
Air India later told the government it would not be able to pay salaries after 31 March 2011 without a Rs 1,200 crore equity infusion.
On 7 December, Mint reported the government would make the equity infusion by mid-December though Air India had failed to achieve some key targets set by the government. But the crucial cabinet committee meeting was deferred because of Chinese Premier Wen Jiabao’s visit.
Wage restructuring was one of the key targets for Air India to qualify for the fresh infusion. The company spent at least Rs 3,000 crore on paying salaries in fiscal 2010.
The carrier has tried to reduce its wage burden, but without success. In 2009, it decided to cut productivity-linked incentives, which account for 30-50% of the salaries of its employees, by 50%. The move would have saved Rs 700 crore a year, but had to be rolled back following a strike.
“There is no concrete proposal for wage negotiations currently,” said George Abraham, general secretary at the Aviation Industry Employees’ Guild, a staff union of Air India.
The negotiations would have to entail integrating productivity-linked incentives of Indian Airlines and Air India into their current salary structures, Abraham said. “We are open minded for upcoming discussions,” he added.
Air India has a total debt of Rs 40,000 crore, including Rs 19,000 crore of working capital loans.
The fresh equity infusion will help it pay the Rs 640.43 crore it owes to state-owned airport operator Airports Authority of India as of 30 September, Rs 480 crore to caterers and Rs 184 crore to aircraft spare vendors.
“Also, this will help the carrier bring down the interest cost for current working capital loans and help in getting long terms loans” for buying aircraft at attractive interest rates, said a senior Air India executive, who did not want to be identified.
Air India and SBI Capital Markets Ltd, an arm of State Bank of India, representing a consortium of banks, have approached the Reserve Bank of India with a debt restructuring proposal.
Proposals for hiving off the ground handling and aircraft maintenance divisions of Air India into separate business units did not come before the cabinet meeting.
Cabinet clears NTPC tender
New Delhi: The Union government on Thursday approved state-owned NTPC Ltd’s proposal for a global tender for procuring equipment capable of generating 7,200MW of power and valued at around Rs 17,000 crore.
“It has been approved by the cabinet,” power minister Sushilkumar Shinde said.
The tender will be for nine turbine and generator sets of 800MW capacity each and nine supercritical boilers, and can be supplied by only those who manufacture in India. It will be a two-stage tender involving technical and commercial bids.
The equipment are for power projects at Lara in Chhattisgarh, Kudgi in Karnataka, and Darllipalli and Gajamara in Orissa.
Utpal Bhaskar & PTI
pr.sanjai@livemint.com
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First Published: Thu, Dec 30 2010. 10 47 PM IST