From July 1, 2012 the government has decided to stop the productivity linked incentive which accounts for about 70% for the salary of the Air India pilots and engineers. The recent move will help the loss making state owned airline bring down its Rs. 3,700 crores annual wage by Rs. 250 crores.

The move has also come a day after Hindustan Times reported that the oversight committee monitoring AI’s turnaround plan had threatened to stop further inquiry till its stops paying the incentive. Another condition which was set in plan approved by the cabinet was to freeze the payment of the incentive till the airline turns profitable.

The government had also committed to pay Rs. 30,000 crore till 2020 to keep the carrier afloat. Ai India has already got Rs. 2,574 crore this year. So now from July 1, 2012 onwards the employees would be paid salary and allowances according to the department of public enterprises guideline stipulating that the allowances cannot be more than 50% of the basic pay.

A statement from the government said, “The aviation ministry will approach cabinet for payment of flying allowances and some other allowances to be paid to the pilots, licensed engineers and cabin crew as per the industry standard”. The statement also said that the profit and productivity related pay would be introduced in place of the incentive.