The Knesset Finance Committee yesterday approved the transfer of NIS 150 million to state-owned Israel Military Industries in exchange for workers agreeing by August 15 on a program to privatize the company.

Under the plan approved by the committee, a new corporate entity free of debt will take over the assets and operations of IMI, which will then be privatized, according to MK Shai Hermesh (Kadima ), who headed the subcommittee dealing with the IMI privatization.

A second entity holding some NIS 2.05 billion in debt to the government will be transferred to state control. However, the new company will retain IMI's pension obligations, which management says is the biggest part of IMI's debt load.

The NIS 150 million includes NIS 60 million to cover back salaries. The rest will help pay for materials needed to keep production lines running.

A draft agreement with the IMI union, meanwhile, calls for the dismissal of 940 IMI employees; under the agreement, they would get NIS 1.1 billion in severance pay. Another NIS 800 million is being set aside for the possible dismissal of 1,080 additional employees, who might be let go if the company changes ownership.

A further NIS 200 million is being allocated to compensate employees who decide not to move with the company from its current Ramat Hasharon location to the Negev region.

Employees are set to receive an 18% pay increase, implemented in stages between now and 2016.

Hermesh said the Defense Ministry has agreed to take under its wing one unit of IMI that is particularly sensitive from a national security perspective, and which therefore will not be privatized. The Defense Ministry will also fund production lines for certain heavy armaments regarded as strategic.

"Almost everything is agreed on," said Hermesh. "What remains is taking care of the restructuring, whose pace the workers oppose. Management and the Finance Ministry insist that when the workforce is cut by a third, the restructuring must go into effect."

IMI offers a a wide range of defense products, from rockets and guided missiles to heavy aerial weapons, tank, artillery and infantry ammunition, advanced guided mortar and artillery rounds.

IMI also offers integrated weapon systems, including rockets and defensive suites for aircraft and armored vehicles.