New Delhi: The empowered group of ministers (eGoM) has finally cleared Air India's purchase of 68 Boeing aircrafts on Saturday.
The deal, which is the largest aircraft purchase deal in the world this year and the largest ever in India aviation history, was cleared by the eGoM after securing a discount of Rs 1,000 crore.
A price band has also been agreed upon within which prices can move up or down.
After the meeting that eGoM and A-I officials held with Boeing representatives, Civil Aviation Minister Praful Patel said that the documents would now be sent to Prime Minister Manmohan Singh for final approval.
Besides the huge discount on the total price of around Rs 35,000 crore, Boeing has also offered to set up MRO (maintenance, repair, overhaul) and training facilities in India at a cost of around $205 million and a 30 per cent offset deal.
The offset deal means that Boeing will purchase goods from India worth 30 per cent of the value of the deal which works out approximately to Rs 8,500 crore
The GoM, headed by Finance Minister P Chidambaram, has Law Minister HR Bhardwaj and Programme Implementation Minister Oscar Fernandes and Patel as members.
Patel had a few months ago informed Parliament that the deal would cost Rs 38,900 crore- which was the price prevailing at that point of time.
Official sources said A-I has converted its options to buy 16 aircraft into a firm order, taking the total number of firm orders to 50. It is also acquiring 18 more aircraft for its subsidiary Air-India Express.
The fleet would comprise eight Boeing 777-200 (Long Range), 15 B777-300 (Extended Range) and 27 B787s, besides 18 Boeing 737-800s for Air-India Express.
The A-I Board has selected engines for all the 68 aircraft from the CFM International, a 50:50 joint venture between Snecma of France and General Electric Aviation of the US.
While the B777-200s and 777-300s would be fitted with GE90 engines, the B787s would have GEnx engines, totaling to about Rs 4,912 crore.
The B737-800s of the A-I Express would be fitted with CFM56 engines at a cost of around Rs 768 crore.
The fleet acquisition proposals of Air-India and Air-India Express were cleared by the Public Investment Board on October 13.
While the precise calculation of the monetary concessions was being worked out, an official statement gave a break-up of the $205 million investments promised in India by Boeing and GE.
The money would be used for setting up four training simulators costing (up to $75 million), MRO for Boeing aircraft (up to $100 million) and training and other civil aviation requirements ($10 million), besides GE's investment in an engine shop ($20 million).
"Its a substantial deal by any standards," vice-president sales Boeing Dinesh Keskar.
The new fleet will give much needed strength to the ageing Maharaja which is facing intense competition in the international skies.
As the Government wanted the best deal so even after Cabinet gave an in principle approval the matter was taken up by specialised price committee, which was headed by the former comptroller and auditor general.
Saturday's revised price is an example of deft deal making from the Indian government as Boeing had already given a Rs 900 crore price cut to AI.
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