Govt proposes one-year retention for Air India staff after privatisation

Draft RFP sets a precedent for all state-owned firms on the block

In the draft request for proposal (RFP) shared with shortlisted bidders, the government has proposed retaining the existing Air India employees for one year after privatisation, setting a precedent for all public sector undertakings (PSU), including banks, on the block for selloff.

The government had shared the draft RFP and share-purchase agreement (SPA) with shortlisted bidders in April, and has received comments from them, said an official.

The draft RFP requires retaining existing employees for one year, which is a dilution of the government’s previous stance of negotiating employee retention for at least two years, and has been done after consultations with investors, said another official.

However, the government is unlikely to dilute it further, he added.

“The government is clear there won’t be any flexibility or negotiations for further cutting the employee-retention period,” the second official said.

The government is selling a 100 per cent stake in Air India, which has been in losses ever since its merger with domestic operator Indian Airlines in 2007, and Tata Sons is reportedly one of the “multiple bidders” that has put in a preliminary bid to acquire the airline.

The definitive time inserted for retaining the employees in the case of Air India would now trickle down to privatising all PSUs, as potential buyers would want flexibility in running the company, and contain high employee costs, said the second official.

The step has been taken after consultation with bidders to make the privatisation proposal more investor-attractive, he added.

According to the Air India preliminary information memorandum (PIM) shared in January 2020, the airline had 14,032 employees, of whom 9,426 were permanent employees, including 948 on deputation to other firms as on November 1, 2019.

About 36.05 per cent of the permanent employees of the national carrier will be retiring in the next five years.

About 4,201 employees of the airline are on contract, which is essentially for three to five years, and the new buyer will review these terms of contract. The airline’s employee expense was about Rs 3,005 crore as on March 31, 2019. According to provisional figures, Air India is likely to incur a net loss of about Rs 9,779 crore in FY21 against another net loss of Rs 7,983 crore in FY20, according to details shared in the Lok Sabha.

The government aims to complete the sale of Air India by December as against September targeted earlier because the second wave of Covid-19 has disrupted its divestment timelines. The sale of the carrier will also be crucial in the privatisation drive, through which the government expects to garner Rs 1.75 trillion in the current fiscal year.