10 more state units picked for privatisation

PC board gives go-ahead for hiring financial advisers for sale of these entities

ISLAMABAD: The Privatisation Commission (PC) board on Monday agreed to initiate the process of privatising 10 more entities including three power sector and two blue-chip firms and gave directives for the recovery of Rs142 billion worth of dues.

The board gave the go-ahead for hiring financial advisers to privatise two blue-chip oil and gas exploration firms, three power generation companies, two financial institutions, and two engineering companies, according to an official of the Ministry of Privatisation.

With the decision, the active privatisation list swelled to 17, which during the tenure of the previous Pakistan Muslim League-Nawaz (PML-N) government comprised 65 entities, but the current Pakistan Tehreek-e-Insaf (PTI) government cut it down to seven in October last year.

"The board has approved the initiation of privatisation process of 10 entities and expressions of interest for hiring financial advisers will be invited within 48 hours," Privatisation Secretary Rizwan Malik told The Express Tribune after a marathon board meeting.

The PTI government had largely shelved the privatisation plan but there was a change of heart after the appointment of Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh, who pushed the government to sell state-owned entities.

A report of the State Bank of Pakistan (SBP) last week showed that the debt of public sector enterprises (PSEs) increased 47% to Rs2.1 trillion within one year, ending June 30, 2019.

Headed by Privatisation Minister Mohammadmian Soomro, the PC board also discussed a receivable committee report, which called for fast-tracking the recovery of nearly Rs142 billion on account of 14 privatisation transactions. A legal committee was set up to find ways to recover these dues as some parties had challenged the government's claims in courts.

The PC board's receivable committee has identified Rs142 billion worth of dues to be paid by buyers of government entities. The maximum amount of Rs137 billion had been outstanding against Etisalat on account of divestment of 26% stake of Pakistan Telecommunication Company Limited (PTCL) and Rs8.9 billion of withheld dividends.

The committee also found that the Privatisation Commission in the past did not fully disclose its receivables. For instance, Rs137.7 million worth of dues from Trust Investment Bank Limited were not shown in the books.

The issue of Etisalat dues has remained pending for the past more than 10 years. Finance Adviser Shaikh, in his capacity as privatisation minister in 2006, had signed a revised sale-purchase agreement with Etisalat, which involved the transfer of properties in the name of PTCL.

The board approved the expansion of the active privatisation list by adding 10 more entities. PC had requested the board to approve the privatisation of Pakistan Re-Insurance Corporation, Pakistan Petroleum Limited (PPL), Gujranwala Electric Power Company (Gepco), Nandipur Power Plant, Guddu Power Plant, First Women Bank Limited, House Building Finance Corporation (HBFC), Pakistan Engineering Company (Peco), Heavy Electrical Complex (HEC) and Sindh Engineering Limited.

The board did not approve Peco, Gepco and Pakistan Re-Insurance Corporation for privatisation. Gepco was dropped on the request of Power Division.

Instead, the board approved the start of privatisation process for Oil and Gas Development Company and Kot Adu Power Plant.

Early this month, the Cabinet Committee on Privatisation (CCOP) directed the PC to select any 10 public sector enterprises from the privatisation list approved by the CCOP in October 2018 for privatisation.

The PC board also approved the initiation of the process for privatisation of 425-megawatt Nandipur Power Plant and 747MW Guddu Power Plant.

The PML-N government had abandoned the privatisation of power companies in November 2015, which was also followed by the PTI government. The last government had entered into financial advisory service agreements to privatise over 12 power-sector companies, which cost the kitty more than Rs1.7 billion without achieving anything.

The board also approved the privatisation of PPL in which the government currently holds 67.5% shares. The company's market capitalisation is estimated at Rs271 billion at the closing share price of Rs119.5 as on August 23, 2019, the board was informed.

However, the PPL in the past had been struck off the list after provinces raised constitutional issues about the oil and gas sector after the 18th Constitution Amendment.

The board was informed about the legal hindrances in privatisation of Peco due to a 2011 pending inquiry of NAB. The inquiry is being delayed due to pressure exerted by Karachi-based industrialists, said the sources. The board dropped Peco from the list.

Peco was on the privatisation list and despite the then government's instructions not to dilute its direct or indirect shareholding, the National Investment Trust (NIT) offloaded its 1.18 million shares, which reduced the government's shareholding to 33.25% and private shareholding increased to 66.75%.

In 2008, the Public Accounts Committee took up the matter of divestment of Peco shares by NIT and referred the case to NAB for investigation in 2011. The matter is still under consideration of NAB.