Consultants share findings of financial, tax due diligence

Pakistan Ordnance Factory may take over control of tools producer


Zafar Bhutta September 23, 2015
Pakistan Ordnance Factory may take over control of tools producer. CREATIVE COMMONS

ISLAMABAD:


The government is pressing ahead with a plan to privatise Pakistan Machine Tool Factory (PMTF) - a parts producer for missile launchers and submarine systems but a sick unit - and may hand over control of the company to Pakistan Ordnance Factory (POF).


In a meeting of the Economic Coordination Committee (ECC) held on September 17, an official of the Privatisation Division recalled that the ECC in its June 17 huddle had directed the Privatisation Commission to present a comprehensive plan for the PMTF sell-off in consultation with POF and include post-retirement liability of the tool factory employees in the overall cost of transaction.

The ECC had also approved disbursement of salaries of PMTF staff in Karachi for April and May 2015.

The Privatisation Division official said consultants of KPMG company had finalised the financial and tax due diligence of PMTF and submitted their provisional findings.

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As the financial condition of PMTF was deteriorating, it had not been able to pay salaries and wages of its employees since June 2015 and there was a dire need of Rs96 million for payments covering the period June to August 2015, he said.

The official sought the ECC’s approval for the amount, but the committee only gave the go-ahead for paying salaries of two months - June and July.

Earlier, POF had expressed interest in acquiring PMTF and completed the technical due diligence while the tax and financial due diligence was under way.

ECC Chairman Ishaq Dar, who is also the finance minister, had underlined the need for completing the due diligence process and stepping up work on the proposed sell-off.

He also suggested that POF might consider inclusion of post-retirement liabilities of PMTF employees in the overall cost of privatisation transaction.

The Privatisation Division had proposed a bailout package of Rs1.381 billion for the rehabilitation of PMTF, including Rs558 million for working capital and Rs823 million to clear personnel-related dues, but the ECC dismissed the demand.

PMTF has suffered a loss of about Rs2.261 billion. On June 30, 2014, its liabilities were Rs3.657 billion, which rose to around Rs3.794 billion in April 2015.

The profit and loss statement indicates that the company has not been able to utilise its resources appropriately and has gradually turned into a loss-making unit.

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Moreover, due to financial constraints, PMTF has not been able to clear dues of 508 retired employees since 2008 including 37 who have passed away.

Like PMTF, another loss-making state unit, Pakistan Steel Mills, which is also on the privatisation list, has been finding it impossible to pay salaries of its staff as the giant industrial unit is virtually sitting idle.

This came despite an injection of Rs21 billion in the mill in the name of enhancing capacity utilisation. In order to ease sufferings of the employees, the ECC approved another Rs1 billion on Thursday last week for paying two-month salaries to employees of the mill.

Published in The Express Tribune, September 24th, 2015.

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