ISLAMABAD, April 30: The Planning Commission has approved the controversial purchase of eight Boeing 777 aircraft at a cost of Rs105 billion but directed the PIA authorities to renegotiate the issue of higher interest being charged by a foreign bank for extending the required loan.

Official sources told Dawn that the Central Development Working Party (CDWP) of the Planning Commission here on Thursday (April 29) approved Rs120 billion worth of development projects, including the purchase of Boeing aircraft.

Now the Executive Committee of the National Economic Council, which is expected to meet on May 25, would give final approval to the PIA-Boeing deal. Interestingly, PIA had already purchased two aircraft while the remaining six would be bought by 2008.

Sources said that the approval for the new aircraft was granted after heated discussion between the officials of the Planning Commission and the PIA. A senior PIA director told the CDWP meeting that some government officials were opening a 'Pandora's Box' by continuously opposing the aircraft deal, which he termed the best one under the circumstances.

He said that after a detailed review of the Business Plan and PIA's current performance, Exim Bank approved guarantee for the loan which itself indicated its confidence in PIA's proposal.

The Exim Bank, he said, also required the nomination of a guaranteed lender for this transaction. Various banks had shown interest in becoming the guaranteed lender and finally Citibank was selected.

However, the sources said, Planning Commission's deputy chairman Dr Akram Sheikh, who presided over the CDWP meeting, said that since interest rates were falling world-wide, PIA must take up the issue to avoid paying increased interest rate to the lender.