ISLAMABAD: There will not be any surprise privatisation in the budget, as Prime Minister’s Task Force on Energy has recommended putting the privatisation of power distribution and generation companies on hold until these 14 entities are restructured.
The government’s privatisation programme for fiscal year 2019-20 will be restricted to strategic sale of two LNG -fired power plants, sale of unproductive land, divestment of shares in a blue-chip company and sale of a couple of other assets including a banking company, according to sources in the Ministry of Finance and Ministry of Privatisation.
The finance ministry still expects to earn around Rs170 billion, primarily from the sale of LNG-fired power plants and divestment of stakes in Mari Petroleum Company Limited, they added. But the actual proceeds would depend upon the transaction structure of the LNG-fired power plants that will be finalised after the presentation of the new budget.
There were expectations that the privatisation programme of power distribution and generation companies may be revived after reaching a staff-level agreement with the International Monetary Fund (IMF) for a $6 billion bailout package.
At least, the privatisation ministry is unaware of any timeline agreed with IMF on privatisation of the distribution companies, Pakistan Steel Mills and other loss making enterprises, said a senior official of the privatisation ministry on Saturday.
However, there is a general understanding with the IMF that Pakistan will reduce the losses caused by the state-owned enterprises and divest its shareholding in these enterprises.
The privatisation ministry official said that the transaction structure of the LNG-fired power plants will be finalised next month while keeping in mind the investors’ appetite. If the financial adviser recommends selling 100% stakes, the government may fetch over $2 billion or Rs300 billion, he added. But the actual receipts will depend on market appetite.
The federal cabinet has already decided to privatise two power plants, with a combined capacity of 2,453 megawatts, as a bundle package due to legal obstacles in the way of separating these plants from their parent firm. National Power Parks Management Company Limited (NPPMCL) owns both the plants.
The Pakistan Development Fund Limited (PDFL) has bought the equity of these plants in June 2017.
Finance ministry spokesman Dr Najeeb Khaqan said the proceeds of privatisation of power plants will be the revenue of the government as the equity is owned by the PDFL.
The officials said that the privatisation of nine power distribution and five power generation companies was not part of the new budget that Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh will unfold on Tuesday.
In December, the Cabinet Committee on Privatisation had linked the privatisation of these nine power distribution companies and five power generation companies with the recommendations to be given by the Prime Minister’s Task Force on Energy.
The officials said that the task force has given its recommendations and proposed to first restructure these entities before restoring them on the active list of privatisation. The task force recommended to privatise these loss making entities in the third year that too if the issues of circular debt and maintenance of their books are addressed.
Even in the third year, the task force does not see the possibility of privatisation of all the nine distribution companies, said the officials.
The Energy Task Force recommendations will now be placed before the Cabinet Committee on Privatisation for a decision.
The PSM may also not be privatised in the next fiscal year as well after Prime Minister Imran Khan directed last week to revive the entity, according to the officials. The Expert Group on PSM had recommended restructuring the closed industrial unit in the public private partnership mode but the Ministry of Industry wanted to fully privatise it.
Now a financial advisory consortium will be hired for the revival of the PSM.
The privatisation ministry is expected to give an advertisement in the press for hiring financial advisers to sell nearly two-dozen unproductive assets, owned by various ministries. But it does not expect any major revenue from these transactions.
Published in The Express Tribune, June 9th, 2019.