The Economic Coordination Committee (ECC) on Wednesday gave approval for PIA to launch a Voluntary Separation Scheme (VSS) to lay off 25% of its workforce making it around 3,500 employees. It also approved a restructuring plan of Rs457 billion for the national carrier.
The meeting approved Rs330 million for the Ministry of Defence for the maintenance of aircraft. The restructuring plan will be implemented after getting approval from the federal cabinet.
The ECC directed the authorities concerned to further fine tune the restructuring plan and reconcile figures before presenting a final plan before the cabinet.
The PIA required Rs13 billion from the government to implement the VSS to lay off around 25% of a total workforce of 14,000, indicating that around 3,500 working staff will be relieved under the restructuring plan.
Adviser to PM on Institutional Reforms Dr Ishrat Hussain while explaining the ECC decision said that the PIA restructuring plan will convert the Rs457 billion loan into equity as book adjustments would be done in a staggered manner to clean the balance sheet of PIA.
He said that the PIA balance sheet was negative so it requires a restructuring plan on an immediate basis.
Dr Hussain said that there would be no cash injections, but the loans and liabilities would be converted into equity in a staggered manner and PIA would be restructured.
The ECC, which held its meeting under the chairmanship of Finance Minister Hammad Azhar, was informed on Wednesday through a summary submitted from Civil Aviation Authority (CAA) that total losses of PIA ballooned to Rs457 billion as of 30-09-2020 including GoP-guaranteed loans of Rs201.8 billion, loans from GoP of Rs55.6 billion, loans on PIA balance sheet of Rs53 billion and mark-up on loans of Rs16 billion. So in totality, the loans and mark-up peaked to Rs326.4 billion.
The PIA balance sheet further disclosed that payables to PSO stood at Rs16.4 billion, to CAA at Rs86.7 billion and outstanding tax liabilities at Rs14.7 billion. So in totality, the payables to different government institutions stood at Rs117.8 billion. In totality, the losses of PIA stood at Rs457 billion.
Now the ECC approved that the GoP-guaranteed loan of Rs201.8 billion will be converted into equity as this outstanding amount will be repaid as per the amortisation schedule from the fiscal year 2020-21 to 2026-27.
The outstanding loans from GoP to the tune of Rs55.6 billion will be settled as book entry and loans on the PIA balance sheet of Rs52.9 billion will be repaid as an amortisation schedule. The payables to government institutions to the tune of Rs117.8 billion will be settled subject to agreement among CAA, PSO and FBR to waive as receivables. The VSS amount of Rs12.9 billion has already been approved by the government.
