Rs13.6b PIA bailout package approved

Since 2005, PIA has incurred accumulated losses of Rs316 billion as of December 2016

ISLAMABAD: The government, on Wednesday, approved a Rs13.6 billion bailout package for the ailing Pakistan International Airlines (PIA) – the fourth in a year – and enhanced its sovereign guarantees limit to Rs175 billion to keep the national flag carrier cruising.

Headed by Prime Minister Shahid Khaqan Abbasi, the Economic Coordination Committee (ECC) of the Cabinet approved the increase in the guarantees limit to enable the loss-making entity to meet its expenses. In January, the ECC had increased the limit from Rs151 billion to Rs161.5 billion, which turned out to be insufficient due to mounting losses.

The ECC also exempted pensioners and ‘Shuhada family welfare accounts’ from the 10% income tax on profit from banks and national saving schemes. It decided to keep the wheat support price unchanged at Rs1,300 per 40kg.

In a bizarre move, the ECC approved grant of honorarium and rewards for government officials implementing parliamentarians’ schemes. The step has apparently been taken as an incentive to bureaucracy to fast-track work on the projects ahead of the next general elections. The government has already lowered implementation criteria to accommodate more politically motivated development schemes.

The ECC approved Rs13.6 billion fresh injection into the ailing national flag carrier that has been incurring continuous losses since 2005, resulting in accumulated losses of Rs316 billion as of December last year.

The Aviation Division had requested a Rs16 billion facility but the Ministry of Finance cut it down to Rs13.6 billion. Of the amount, Rs5.3 billion will be borrowed to pay interest on previous loans, Rs2 billion has been given for undertaking an engineering project, Rs1 billion for ground support equipment and Rs5.4 billion for construction of PIA hangers at New Islamabad International Airport.

The PIA was on the active list of privatisation that the government shared with the International Monetary Fund (IMF) under the last three-year $6.2 billion bailout package. The airline’s outstanding loans have surged to Rs186 billion, including Rs24 billion added during the four years of the third PML-N government. With the approval of the fresh bailout package, PIA’s borrowings during the tenure would soar to Rs37.6 billion. The management has worked out its financing needs for the July-December 2017 period at Rs30.3 billion.

The ECC exempted profits of National Savings’ Pensioners Benefit Accounts (PBA) and Behbood Savings Certificates (BSC) from the levy of 10% income tax. The schemes cater to pensioners and widows and are exempted from withholding tax. The Federal Board of Revenue had imposed the income tax recently by issuing a circular, creating ripples among the retired people. In order to provide relief to the families of martyrs, the ECC also extended the same facility to Shuhuda Family Welfare Accounts.



Wheat support

The Cabinet body approved a proposal to maintain the minimum guaranteed price for the 2017-18 wheat crop at the previous year’s level of Rs1,300 per 40kg. The government has retained the price for past few years due to slump in global commodity prices. China – the largest wheat producer – on Monday cut the support price by 2.5%, aimed at clearing the glut.

The ECC also approved supply of 20,000 metric tons of wheat from the Pakistan Agricultural Storage and Services Corporation (Passco) to the United Nations World Food Programme for temporarily displaced people of the Federally Administered Tribal Areas. The government will bear Rs785 million subsidy.

Energy sector

The ECC approved a proposal to allocate 14.8MMscfd gas from Aminah field and Ayesha North field to SSGC. It granted exemption to Sara and Suri fields from rule-43 (delay or termination of production) of 1986 rules for development and production leases. The field development plan and grant of development and production lease for Mubarak block and Gambat block was also approved. The committee approved a proposal of the Petroleum Division about allocating 83.2 million cubic feet of gas daily from Shahdadpur to the Sui Southern Gas Company.

It also approved a proposal for construction of the Machike-Tarujabba pipeline on a build, operate and transfer basis for transporting oil from Lahore to Peshawar.