In a major policy shift, a cabinet panel on Friday approved to sell off the entire government stake in two state-owned companies with management control against its earlier decision of selling only 26 per cent share.
The Cabinet Committee on Privatisation (CCOP), headed by Finance Minister Dr Abdul Hafeez Shaikh, approved the new transaction structure for privatisation of National Power Construction Corporation (NPCC) and Heavy Electrical Complex.
The CCOP allowed sale of minimum 88 per cent government shares in the NPCC and divestment of minimum 96 per cent shares in HEC along with management control. Earlier, the Cabinet Committee had allowed to divestment of 26 per cent shares along with management control under public-private partnership model. The Privatisation Commission would seek new Expression of Interest from interested parties following the decision.
Heavy Electrical Complex (HEC) is one of the industrial units of State Engineering Corporation (SEC) engaged in manufacturing of power transformers. HEC also repairs and refurbishes old and damaged power transforms up to 500 kilovolts. HEC was put on the privatisation list in 2005.
The National Power Construction Corporation (NPCC) was established in 1974 and has its branch office in Saudi Arabia. NPCC undertakes execution of large power construction projects including high and low voltage lines, distribution networks and electrification of large housing and commercial projects in Saudi Arabia.
National Logistic Cell – the commercial logistic arm of the military – has already sought permission to buy NPCC’s Saudi Arabia-based operations that many view as violation of the NLC mandate. The Public Accounts Committee recently held three military generals responsible for causing Rs1.83 billion loss to the national exchequer in the NLC stock market investment scam.
Row over bonus shares settled
The Cabinet Committee gave a decision in favour of the Privatisation Commission to settle a dispute with Pakistan Petroleum Limited over holding of bonus shares under the Benazir Employees Stock Option Scheme. The CCOP directed the PPL Employees Empowerment Trust to surrender bonus shares to the PC and instead receive dividends. The PPL took a plea that instead of giving cash dividends, the PC should give bonus shares to the employees.
The PC explained before the CCOP that under Benazir Employees Stock Option Scheme (Besos), 50 per cent cash dividend is distributed among employees who receive free of cost unit certificates while shares are retained by the respective Trusts. Remaining 50 per cent dividend is transferred to the Central Revolving Fund for subsequent payment of buy-back claims. The Scheme, as such, envisages 50 per cent cash dividend distribution to employees and not distribution of 50 per cent shares (including bonus shares) to them.
Besos is designed as a special instrument, which operates under a dedicated framework approved by the Federal Cabinet for ensuring transfer of 12 per cent government shares to entity based Trust free of cost for a specific period. The employees are given unit certificates in lieu of the shares retained in the respective Trusts. These shares are subsequently transferred back to government for buyback of claims of the beneficiary employees.
After deliberation, the CCOP approved two of five recommendations made by Privatisation Commission whereby the finance ministry was instructed to release Rs10 million on annual basis for BESOS and Rs1 billion demanded on actual basis to pay the buyback claims in hand. The amount has been sought for final settlement of shares on retirement of the employees.
The CCOP constituted a sub-committee headed by the Federal Minister for Privatisation to further look into the details of the remaining three to four recommendations made by Privatisation Commission.
Published in The Express Tribune, August 6th, 2011.