Govt agrees to Air India staff demands

To bear the cost of liquidation loss on account of transfer to EPFO, encashment of leave

The central government has agreed in principle to Air India employees’ main demands, fearing an industrial dissension now could impede the process of privatisation. It has agreed to bear the cost of liquidation loss on account of transfer to the Employees' Provident Fund Organisation (EPFO) from company-owned trusts, inclusion of employees in the central government health scheme (CGHS), and encashment of leaves.

The template of the Air India process will be followed for other public sector undertakings up for privatisation at a later date.

“The ministerial panel on Air India has agreed to most demands. If required, budgetary support will be provided before transfer of ownership takes place,” said a government official involved in the process.

Home Minister Amit Shah-led Group of Ministers met last week and decided to release budgetary support to meet the demands. Sources said the total outgo is projected to be around ~250 crore.

These issues had been snowballing. Had some employees moved court, that could have thrown a spanner in the works. The government, in fact, is looking to conclude the sale process by the end of this year, said Department of Investment and Public Asset Management Secretary Tuhin Kanta Pandey.

Air India’s eight employee unions have been urging the government to iron out the kinks in matters concerning human resources, including provident fund (PF), medical, and other welfare benefits.

Reports said the Tatas were already concerned over the lawsuit filed against the company by Scottish energy company Cairn Plc and have sought an indemnity clause in the share purchase agreement.

Air India has 16,077 employees, of which 9,617 are permanent, entitled to gratuity and other benefits.

The government has put 100 per cent stake of the airline on the block, including its lowcost international subsidiary Air India Express and 50 per cent in the ground-handling subsidiary Air India SATS.

The issue over PF arose after the airline management decided to transfer PF accounts to the EPFO before transferring ownership of the airline. However, the process requires premature liquidation of securities held by trusts, which would have resulted in either surplus or shortfall in the corpus depending upon prevailing market conditions. Both trusts have already incurred significant losses in their corpus due to investments in bankrupt companies, such as Infrastructure Leasing & Financial Services and Dewan Housing Finance Corporation.

In case of a shortfall in liquidation value of the investment of the existing PF trusts, it would be adjusted by the government - if needed through budgetary support, said sources. As part of the share transfer agreement, the government will mandate that the new owners of Air India will have to take on the liabilities against gratuity of employees, who retire after the privatisation of the airline.

Similarly, another primary demand by employees seeking continuance of medical benefits has been given in-principle approval as well. Sources said the Ministry of Civil Aviation (MOCA) has resumed talks with the CGHS officials.

Concurrently, the panel has also accepted that employees may be allowed to stay in the residential colonies for six months after disinvestment. There are multiple residential colonies built for Air India staff - the largest of which is in New Delhi's Vasant Vihar. These housing properties are not part of the sale and will be monetised to service debt of around ~30,000 crore, which the government has hived off into a special purpose vehicle to sweeten the deal for bidders.