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What Tatas get in the deal is the full ownership of Air India and Air India Express. It will also own 50% in Air India SATS, the ground-handling arm. Iconic brands Air India, Indian Airlines, the Maharajah will also go the Tatas. Also, 141 aircraft and over 7,000 domestic and international slots are part of the deal.

Owing to the fear of an industrial strife hindering the process of Air India’s privitisation process, the central government in an in-principle agreement would adhere to the main demands of the airline’s employees, Business Standard, reported on Tuesday. In order to meet the demands, a group of ministers led by Home Minister Amit Shah had decided to release budgetary support, with the total outgo projected to be around Rs 250 crore.

The eight employee unions of the airline have been urging the government to fix the problems in issues connected to human resources, which includes Provident Fund (PF), medical, and other benefits. Following this the government has agreed to include employees in Central Government Health Scheme (CGHS), encashment of leaves, and bear the costs of liquidation loss on account of transfer to the Employees Provident Fund Organisation (EPFO) from company-owned trusts.

If Some of the employees had moved the issues to the court, it would have delayed the government’s plans to conclude the sales process by the end of this year, the publication said.

Tata Sons who are the frontrunners to take over the national carrier were already worried over the lawsuit filed against the airline by Cairn Plc, and is seeking an indemnity clause in the share purchase agreement. As of March 31, 2020, losses of over 70,000 crore have been accumulated by Tata.

New players to bear the liabilities of the airline

The government, as part of the share transfer agreement has mandated the new owners of Air India to take on the liabilities against gratuity of employees, who retire after the privatisation of the airline. At present Air India has 9,617 permanent employees who are entitled to gratuity and other benefits. In total they have 16,077 employees.

The Provident Fund issue arose, when the management of the airline decided to transfer the accounts to the EPFO, before transferring the ownership of the airline.

However, depending on the prevailing market conditions, the process would result in either surplus or shortfall in the corpus, while liquidating the securities held by trusts. Also, by investing in bankrupt companies like Infrastructure Leasing & Financial Services and Dewan Housing Finance Corporation, both these trusts have incurred significant losses in their corpus.

The government through its budgetary support would adjust the liquidation value of the investment of the existing PF trusts, if in case there is a shortfall.

Similarly, employees have sought for the continuance of medical benefits for which an in-principle approval has been given. Depending upon the pay grade of the employee, deduction is made from the salary, according to CGHS.

In regards to the leave encashment, the ministerial panel has asked the management of the airline to calculate the amount to be paid. Employees of Air India are entitled to a leave encashment of 300 days.