NEW DELHI, Feb 5: The ministries of civil aviation and finance have agreed upon a Rs 325-crore package for the restructuring of Indian Airlines. In a letter to the ministry of civil aviation, the Department of Expenditure sanctioned the amount for the 1998-99 Plan over and above the Rs 525-crore allocation made for the sector in the Ninth Plan period.Of this Rs 125 crore will go towards fresh equity infusion in the airline with the remaining Rs 200 crore as compensation for grounding A 300 planes by the airline at the behest of the government. The amount will also fund any acquisition of new aircraft by IA.
Aviation ministry sources said the money would be allocated in two phases, with the equity and some portion of the allocation coming in the first phase and the remaining after the airline firms up its plans for aircraft acquisition.
The funds are expected to help implement the recommendations of the Kelkar committee on turning around IA financially. The finance ministry has also imposed a number ofconditions for the airline to fulfil including an improvement in the ratio of salary to productivity of the employees. IA has also been asked to cut costs through a freeze in recruitment and improve profitability.
The Expenditure Secretary, C Ramachandran, said the package would be released fully only after all the conditions were fulfilled by the airline.
The plan outaly for the aviation sector already provides for the Rs. 125-crore equity infusion. The remaining Rs 200 crore will be additional.
Planning Commission sources said the additional amount would have to come from unused allocations of other departments. However, it has also provided for an increase in the outlay in subsequent years of the Ninth Plan for the restructuring of IA and Air-India.
The airline, which earlier reduced its target profits for the year from Rs 90 crore to Rs. 40 crore may have to reduce it further because of poor growth so far during the year.
IA made a profit of Rs. 14 crore in November against the projected Rs22.53 crore.
The December performance improved, with the airline recording a profit of Rs. 25 crore against the Rs. 27 crore projected.
However for the April-December period profits will work out to a modest Rs. 16 crore. Aviation ministry sources said the funds could be released only after the National Development Council (NDC) approved allocations made by the Planning Commission and that can happen onlyafter the new government is formed.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
