ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government on Tuesday approved its second bailout package in four months for the Pakistan International Airlines (PIA) to keep the national flag carrier in the skies, as it remains unable to put in place a viable revival plan.
The Economic Coordination Committee (ECC) of the Cabinet approved Rs5.6 billion for the PIA and left a decision on another Rs8.4 billion injection on the federal cabinet that will meet on Thursday.
The ECC also gave consent to the Frontier Oil Company – a subsidiary of the Frontier Works Organisation (FWO) – to build Machike-Tarujabba Oil Pipeline project.
The second bailout package for the PIA has been approved by the Finance Minister Asad Umar without first securing the PIA revival plan. The PIA management made yet another promise with the ECC on new business plan, giving March as deadline this time.
It is the second bailout package approved by the government of Prime Minister Imran Khan. Earlier, the federal cabinet had approved Rs24 billion package.
The total injection by the PTI government has jumped to Rs30 billion that will increase to Rs38 billion if the federal cabinet also decides to give the PIA another Rs8.4 billion on coming Thursday.
“In order to facilitate the borrowing, the ECC extended the guarantee limit from Rs211 billion to now Rs216.6 billion,” said an official in the Ministry of Finance.
The ECC approved additional guarantees of Rs 5.6 billion for repair and maintenance of engines and acquisition of related spare parts for operationalising grounded planes, said an official handout of the Finance Ministry. It said the step would strengthen PIACL’s route rationalisation initiatives and add to revenue generation of the national flag carrier.
The PTI government is following in the footsteps of the last Pakistan Muslim League-Nawaz (PML-N) government that had kept the PIA afloat for five years by providing such bailouts. The PTI government has already delisted the PIA from the privatisation list without first preparing its revival plan.
Through a letter in September 2018, the federal government, being the majority shareholder, had assured the nation of keeping the PIA as a ‘going concern’ and has been injecting money, directly or indirectly. It has also allocated Rs18 billion in this fiscal year’s budget to service the PIA’s debts.
The ECC also allowed the Finance Ministry to adjust government of Pakistan guarantees related to US denominated loans whenever there is fluctuation in exchange rate.
The PIA owed $125.84 million to foreign creditors which were backed by sovereign guarantees. Due to depreciation of the rupee, the value of these guarantees has gone down.
The ECC in consideration of proposal submitted by Petroleum Division gave its consent for the Frontier Oil Company to undertake and implement the Machike -Tarujabba Oil Pipeline project.
According to the Finance Ministry, the project – consisting of three sections Machike-Chak Pirana, Chak Pirana-rawat and Rwat-Tarujabba – aims at transportation of High Speed Diesel and Motor Spirit.
Earlier, the ECC had given allowed the Inter State Gas Systems (ISGS) to construct the pipeline on Build-Own-Operate-Transfer model. The ISGS’s technical consultants had recommended giving the contract to the CJT Consortium of China. But the Oil and Gas Regulatory Authority (Ogra) did not issue a license.
The ISGS board of directors passed a resolution for tabling a case before the federal government to decide fate of a planned white oil pipeline after the regulator granted licence for another pipeline on the same route to the Frontier Oil Company.
Ogra ignored the ISGS after it found FOC proposal competitive. Ogra gave a presentation in the ECC on Tuesday and said there would be saving of at least $45 million after award of contract to the FOC. There was also no requirement to give sovereign guarantees to the FOC. But the ISGS contested Ogra claims in the ECC meeting.
Research on crops
The ECC directed the Ministry of National Food Security & Research to present, within 30 days, a plan for strengthening research and development services for different crops with particular focus on cotton.
The ECC also directed the ministry to expedite efforts for implementing PB Ropes technology to counter the pink bollworm which impedes cotton growth. The meeting directed that Ministry of Industries and Production would take measures for recovery of cotton cess from textile mills so as to give impetus to cotton promotion activities, which are to be funded through the cess.
The Ministry of Maritime Affairs briefed the meeting with regard to the location of any new LNG terminals as well as the assessment of requirement for relocation of the existing terminals.
The committee took note of the presentation and directed the relevant ministries to work out the medium to long term requirement of LNG in the country and present the same to the ECC in one week.
The Maritime Affairs Ministry demanded that under the rules of business of 1973 establishment of marine terminals is its job and the subject should be withdrawn from the Petroleum Division.