Air India’s plan to trim its 27,000 bloated workforce by offering a voluntary retirement scheme (VRS) is stuck in the North Block, with the Finance Ministry questioning the rationale behind the proposed scheme.

The VRS scheme is “stuck in the Finance Ministry over the payment of Rs 1,200 crore for it. The ministry has pointed out that around 7,000 employees will retire from service over the next three years and another 12,000 will be transferred to the ground handling and engineering subsidiaries,” Air India sources said.

This means only about 8,000 employees will be left with the carrier over the next five years, as it has not been hiring for the last couple of years.

The Finance Ministry does not see any rationale in coming out with such an offer at this stage, the sources said, adding that Air India requires the nod of this Ministry and the Department of Expenditure before it comes out with the offer.

The airline had last September approved the VRS package for all its permanent employees who have served for 15 years or were at least 40 years of age. The proposed scheme targeted a total of approximately 5,000 employees.

However, licensed category employees, like pilots, aircraft engineers, simulator maintenance engineers, approved flight dispatchers and service engineers, would not be eligible for the scheme.

The national carrier also aims to reduce its annual wage bill by Rs 375 crore annually over the next five years once VRS is doled out to its employees.

“This way Air India’s net savings would be Rs 1,725 crore in the next five years and if the government gives out Rs 1,200 crore, then it will save a little over Rs 500 crore only. Moreover, there is also an apprehension that the talent will migrate and the deadwoods would remain there till superannuation,” the sources said.

The scheme envisages a compensation for 35 days for each completed year of service and 25 days for each year of service which remains.

Air India has hived off its ground handling and MRO divisions into two wholly-owned subsidiaries – Air India Air Transport Services Ltd and Air India Engineering Services Ltd, as part of the Turnaround and Financial Restructuring Plans.

The two organisations have been functional since February.

The national carrier is in the process of transferring around 5,000 employees to the engineering entity and another 3,000 to the ground handling subsidiary.

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