ECC approves Rs22b bailout for PIA

Levies 15% additional duty on import of finished iron and steel products

ISLAMABAD:

The federal government on Friday approved a Rs22 billion bailout package for Pakistan International Airlines (PIA).

The move comes just two days before a joint sitting of parliament which, among other legislation, is expected to take up a controversial bill to pave the way for the national flag carrier’s privatisation.



The Economic Coordination Committee (ECC) of the Cabinet approved the package that includes Rs5 billion in fresh guarantees for more borrowings and a roll-over of Rs17 billion debt that PIA incurred in the past, finance ministry officials said. The net increase in liabilities of PIA will be Rs5 billion.



The ECC allowed an increase in the limit of the federal government guarantees for PIA from Rs146 billion to Rs151 billion to help the national flag-carrier pay its liabilities, a finance ministry handout said. It is the second time in the last four months that the government increased the limit of guarantees. Earlier, in December, the ECC had jacked up the limit from Rs141 billion to Rs146 billion.

The finance ministry will also assist the Aviation Division negotiate a Rs12 billion loan roll-over with banks, said the officials. In addition, it will also help roll over Rs5 billion loans that PIA borrowed on its balance sheet without support from the finance ministry.

The government did not mention the Rs17 billion roll-over in the official handout.



Over Rs8 billion in loans are maturing in the next three months that have to be serviced to avoid default. The PIA also needs money to pay to Pakistan State Oil. The airline needs Rs3.8 billion per month just to pay back its past debt and interest against them.

Other decisions

The ECC also levied 15% additional regulatory duties on import of finished iron and steel products, denying the housing and construction industry benefits of reduced steel prices in the international markets. With the fresh decision, the steel products will be subject to 45% regulatory and customs duties.

Before the 15% additional duty, the imported iron rods was available at Rs54,000 per metric tons against locally-produced rods at Rs64,000 per metric ton. The ECC also approved levy of 10% regulatory duty on import of aluminum alloy.

It also allowed allocation of 45mmcfd raw gas from Qadirpur Gas Field to TNB LPL for ten years, enabling the plant to continue to provide 211 megawatts electricity. The ECC also increased the plant tariff.

The ECC also gave yet another extension for export of wheat and wheat flour till June 15, as despite previous extensions the provinces could not export the required commodities due to depressed global prices. It also approved an extension in submission of bids documents for setting up 1,000MW LNG-based IPPs initiative till April 5.

Published in The Express Tribune, March 19^th, 2016.