Cabinet approves hike in dearness allowance, relief
after the failure of a costly turnaround plan and an earlier effort to sell a controlling stake in the national carrier.
To sweeten the deal, the Centre has also reduced Air India’s debt from about ₹56,334 crore to about ₹23,287 crore.
The cabinet, headed by Prime Minister Narendra Modi, had recently approved an amendment to the foreign direct investment (FDI) policy to permit FDIS of up to 100% in Air India by NRIS under the automatic route.
The viral outbreak gives the Indian government more time to prepare for the sale, said Lewis Burroughs, head of aviation, India, ICF, a global consultancy. “In terms of market appetite, investors could be cautious during the next two quarters or so. However, with the government keen to privatise the airline, the divestment of Air India should happen in the future,” Burroughs said.
NEWDELHI: The union cabinet led by Prime Minister Narendra Modi on Friday announced a 4% increase in dearness allowance (DA) and dearness relief (DR) from 17% to 21% for 2020-21. The move will benefit over 11.37 million government employees and pensioners. In October 2019, the government had increased DA from 12% to 17%.
“The combined impact on the exchequer on account of both DA and DR would be ₹12,510 crore per annum, and ₹14,595 crore in financial year 2020-21 (for a period of 14 months from January, 2020 to February, 2021). It will benefit about 48.34 lakh central government employees and 65.26 lakh pensioners,” the union cabinet said in a statement.
The government believes the hike will help increase disposable income and drive demand.
However, experts said while the DA hike will work as a mood enhancer in a fragile market condition, it is unlikely to boost consumption. “The government could have delayed the DA announcement, but they did so today because they are willing to pull the economy up. But, the sentiment is down and people are now risk-averse. Any additional money in their hand may push them to save than spend,” said Sunil Sinha, principal economist, India Ratings and Research.
Asit Ranjan Mishra contributed to this story.
THE CENTRE HAS CUT AIR INDIA’S DEBT FROM ABOUT ₹56,334 CRORE TO ₹23,287 CRORE