Governance Now Masterminds

Govt enhances compensation for Air India to operate flights for President, PM

The costs of maintenance have been constant since 2011-12

GN Bureau | July 6, 2018


#Air India   #PSU  

Easing the financial burden of the Air India, the government has decided to enhance the expenditure for special extra section flights (SESF) operations from Rs 336.24 crore to Rs 534.38 crore for 2016-17 to compensate the cost of living index and exchange fluctuation for the maintenance of wide-bodied B747-400 aircraft.

The government wants to ease out the financial pressure of the national carrier which operates SESF with B747-400 aircraft for the President, the Vice President and the Prime Minister of India. In view of the serious financial and liquidity position to the company, the enhancement would help to ease some of its financial burden, a statement said.

The costs on account of these flights are reimbursed to Al by the respective ministries. The union cabinet in October, 2011 had approved an annual expenditure of Rs 336.24 crore for meeting the fixed costs relating to the expenditure incurred by Al on the said aircraft.

This fixed cost of maintenance was allocated amongst the three respective ministries. These costs have been constant since 2011-12 fiscal. Over the past five years there has been a substantial increase in the expenditure incurred by Al on maintenance of these aircraft on account of the increase in the cost of living index, depreciation of the Rupee against the US Dollar and increase in the material cost. It is therefore necessary to review the estimates/reimbursements provided to Al since 2011-12 FY as the cost base has not been indexed to inflation.

Since, Al is suffering financial losses, the airline cannot afford to provide any services below its cost, a release said.

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