Air India’s buyer may have to bear cost of benefits to staff retiring post deal

NEW DELHI: The new owners of Air India may have to take the liabilities against gratuity and medical benefits of employees, who retire after the privatisation of the airline, as the government estimates that the cost to service these liabilities is not even 1% of total revenues of the airline.

“We have estimated that the gratuity and medical liabilities would be in the range of Rs 180 crore per annum, which is about 0.6% of the total revenues as on date and would not cost the future owners a lot. This should not bother the prospective bidders,” said a source in the know, who did not want to be identified.

The official explained that the gratuity for each employee is capped at Rs 20 lakh but the medical benefits are not capped and added that the liabilities would remain within the limit. Air India, according to the financial numbers of 2018-19, clocked revenues of about Rs 30,000 crore. Air India has 16,077 employees, including 9,617 permanent employees that are entitled for gratuity and pensions. It is estimated that 500 more employees will retire by the end of this fiscal – the government intends to complete the sale process and find a new owner by March-end –further reducing the employee numbers.


The rest 6,460 employees are on contract and others and, thus, not entitled for any such benefits.

Medical benefits, post retirement, is one of the concerns of the employees and the government has been working to address it. One of the suggestions made was to bring these all employees under Central Government Health Scheme but they did not agree thinking that this would set a bad precedent for all PSUs being sold.