Centre helps Air India carry its SESF burden, raises dole out to Rs 534.38 cr
In the latest move, the Union Cabinet that was chaired by Prime Minister Narendra Modi has given its approval to enhance the expenditure for "Special Extra Section Flights" (SESF) operations.
That the government is desperate to disinvest national carrier Air India is no secret. However, this bid is taking quite a lot of time, as the regulatory body has failed to find a suitable bidder for the process of privatisation. Air India has been posting losses in its earnings due to the heavy amount of debt in its financial book. Problem is that it keeps adding to it. Till the time government does not find an effective way of privatising Air India, it will have to continue funding the airline in order to keep it afloat. In the latest move, the Union Cabinet that was chaired by Prime Minister Narendra Modi today has given its approval to enhance the expenditure for "Special Extra Section Flights" (SESF) operations. Air India (Al) operates SESF with B747-400 aircraft for the President, the Vice President and the Prime Minister of India. The costs on account of these flights are reimbursed to Al by the respective Ministries.
SESF operations will now be increased from Rs 336.24 crore plus applicable taxes to Rs 534.38 crore plus applicable taxes for 2016-17 with built-in annual escalation of 10% to compensate the cost of living index and exchange fluctuation for the maintenance of B747-400 aircraft.
The cabinet said, “In view of the serious financial and liquidity position to the Company, the enhancement would help to ease some of its financial burden.”
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The Cabinet Committee on Economic Affairs (CCEA) in the year October, 2011 had approved an annual expenditure of Rs 336.24 crore plus applicable taxes for meeting the fixed costs relating to the expenditure incurred by Al on B747-400 aircraft.
According to the cabinet, 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$ and increase in the material cost. It is therefore necessary to review the estimates / reimbursements provided to Al since the year, 2011-12 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.