ISLAMABAD: Following in the footsteps of Pakistan Steel Mills (PSM), Pakistan International Airlines (PIA) has reportedly also decided to retrench 3500 employees, through Voluntary Separation Scheme (VSS), sources close to Minister for Aviation told Business Recorder.
The employees’ retrenchment plan, sources said, will be submitted to the Economic Coordination Committee(ECC) of the Cabinet. Briefing the ECC on PIACL, the Aviation Division referred to a meeting held on December 30, 2017 under the chairmanship of the then Prime Minister, wherein it was decided that the mark-up on the debt of PIACL would be picked up by GoP for five years and its payment would be made directly to the lenders. In pursuance of that decision GoP(Finance Division) had kept an allocation of Rs 24.5 billion in the budget of financial year 2019-20 for payment on mark-up on GoP guaranteed loans on the basis of assumption of Karachi Interbank Offered Rate (Kibor) 10.69 percent. Subsequently, the actual demand was enhanced due to the big changes in Kibor.
According to sources, Aviation Division has also said that a summary for the ECC of the Cabinet was initiated regarding GoP support required by PIACL for mark-up and VSS on July 9, 2019 which was considered on July 17, 2019. However, the ECC deferred its decision with the direction that proposal may be re-submitted to it after completion of Hajj operations, 2019.
It was further informed that a shortfall of Rs 3.2 billion existed in the budgetary allocation in relation to actual obligations related to mark-up payments on GoP-guaranteed loans: (i) the drastic change in Kibor (Kibor 13.5 percent); and (ii) the re-appropriation of funds for In-Flight Entertainment (IFE), i.e., Rs 600 million.
A brief summary for mark-up (2019-20) is as follows : (i) funds allocated for FY2019-20 - Rs 24.5 billion; (ii) actual utilized up to February, 2020 + WE (0.6)- Rs 20.59 billion; and (iii) by March to be disbursed - Rs 1.556 billion. This shows that an amount of Rs 2.35 billion is still in balance. The projected claim for 4th quarter (FY2019-20) is Rs 5.5 billion. The additional budget required is Rs 3.2 billion.
The sources said the Aviation Division requested the ECC for an additional funds/grant to the extent of PKR 3.2 billion so that the obligations on account of Markup against GoP guaranteed loans could be met.
The Aviation Division also said that PIA planned to offer VSS to 3500 employees, which will cost approximately Rs 9.7 billion. The detailed outline, procedure and cadres to be offered VSS are being formulated in consultation with an expert legal counsel on the subject which is likely to be completed by June 30, 2020. The plan would be presented to the ECC of the Cabinet for consideration accordingly.
The sources said Prime Minister Advisor on Institutional Reforms and Austerity, Dr Ishrat Husain is also working on reforms in PIA, Railways and Federal Board of Revenue (FBR).
Last month, PIA announced its financial results for the year 2019 and recorded an increase of Rs 43 per cent in its annual revenue. The national air carrier’s revenue surged to Rs 147.5 billion for the year 2019 as compared to Rs 103.5 billion in 2018.—MUSHTAQ GHUMMAN
