Till end of Hajj operations: Voluntary Separation Scheme deferred in PIA by Cabinet

The Economic Coordination Committee (ECC) of the Cabinet has deferred Voluntary Separation Scheme (VSS) in Pakistan International Airlines (PIA) till the completion of Hajj operations as any such decision can jeopardize current operations, sources close to Minister for Aviation told Business Recorder. The Strategic Business Plan of PIACL was submitted to the Prime Minister on April 4, 2019.
The prime minister approved in principle the liquidity requirements for mark-up and Voluntary Separation Scheme for PIACL as presented by PIACL and directed the Finance Division for further necessary action. In a meeting held on December 30, 2017 under the chairmanship of former Prime Minister, it was decided that 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 the decision of December 30, 2017 an amount of Rs 18 billion was allocated during the financial year 2018-19 and paid directly to the lenders by the Finance Division. PIACL requested for GoP cash support for the following purposes: (i) owing to volatility in Monetary Policy rate and dollar rupee parity, the amount has increased from Rs 18 billion to Rs 19.628 billion. The difference of Rs 1.628 billion is required to pay mark-up during FY 2018-19; (ii) budget estimates of Rs 24.524 billion for FY 2019-20 were also shared with the Ministry of Finance, on the basis of these assumptions (Kibor 10.69 percent and dollar to rupee 140. The demand for the year 2019-20 of Rs 24.524 billion has now been revised upward to Rs 30.071 billion due to recent drastic change in monetary policy and dollar to rupee parity; and (iii) GoP cash support of Rs 9.779 billion is required to meet expenditure on account of VSS. After this provision, the process of VSS can start which will result in saving of Rs 5.057 billion per annum.
During discussion in the ECC on July 17, 2019, it was pointed out that Hajj operations 2019 had started and at this juncture implementation of VSS may jeopardize the operation due to retirement of PIA employees, who are involved in operation; therefore the forum deferred its decision in VSS till completion of Hajj operations 2019.
Aviation Division also submitted a summary for Rs 600 million in the name of improvement of in-flight entertainment (IFE). PIACL, in its proposal embarked upon a programme to indigenously develop the IFE system which will not only save substantial cost for PIACL but will also save precious foreign exchange. The cost of this project, initially estimated at Rs 485 million, has now been increased for the following reasons: (a) when the project was initiated in November 2018, the estimated cost Rs 485 million for Boeing 777 aircraft was based on $ 1= Rs 132.50; (b) in May 2019, with 14 percent increase $ 1= 151.00, the funding requirement was raised to Rs 553 million; and (c) PIACL has, therefore, requested for Rs 600 million grant which will have cushion to adjust further fluctuation in $-rupee parity.
During the ensuring discussion in the ECC, it was pointed out that PIA's request for provision of funds is for operational nature of work and if it is approved, other public sector entitles will also claim similar demands. It was, however, stated that PIA is meeting operational expenditure from its own resources and proposed grant is being demanded for upgradation.
Finance Division did not support the proposal of Aviation Division for provision of cash grant of Rs 600 million for IEF system. The ECC did not digest the arguments of Aviation Division and decided that cash grant of Rs 600 million for IEF system will be arranged as Cash Development Loan through re-appropriation of budgetary allocation for debt servicing.