NA panel advises delay in LNG plants’ sale

Recommendation due to depressed market conditions, to avoid losses to exchequer

ISLAMABAD:

The National Assembly Standing Committee on Privatisation has recommended the government to delay the sale of two liquefied natural gas (LNG)-fired power plants due to depressed market conditions and to avoid losses to the national exchequer.

Headed by Pakistan Peoples Party’s (PPP) Syed Mustafa Mahmud, the standing committee also expressed concern over a lack of clarity on part of the government about privatisation and restructuring of state-owned enterprises.

The government could not give a satisfactory answer to the question whether it was keen to revive Sarmaya-e-Pakistan Limited (SPL), which it had incorporated in February 2019 to revive sick industrial units.

Owing to the overall economic slump, the committee advised that the government should push back the privatisation of LNG-fired power plants, said Mahmud.

The committee had been told in the past that the government expected $2 billion worth of proceeds from the privatisation of the two power plants and if in these circumstances the government went ahead with the transaction, it may not get a good price, he added.

The Pakistan Tehreek-e-Insaf government wants to privatise Haveli Bahadur Shah and Balloki power plants to raise money. In September last year, Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh said he expected to raise Rs300 billion from the sale of these two plants which, according to him, should happen by December 2020.

Minister for Privatisation Mohammad Mian Soomro assured the parliamentary forum that the government would not sell the plants at throwaway prices. He agreed that market conditions were not good.

However, the minister said in recent days there was some positive response from banks to finance the privatisation transaction. Last month, Soomro flew to Karachi and met presidents of large local banks along with officials of the power sector regulator. The meeting was held at the State Bank of Pakistan.

Profitable entities should not be privatised, said Khurram Shehzad of the PTI.

The standing committee also took a briefing from the Ministry of Finance about SPL, which once had been touted as Pakistan’s Khazana Company, set up on the Malaysian model.

A year ago, six directors of SPL board, including its chairman, resigned from their positions, which affected operationalisation and functions of the company, said Anwar Sheikh, Senior Joint Secretary of the finance ministry. To a question, Sheikh said the directors resigned due to various reasons.

However, the privatisation minister said the directors resigned because they could not devote their time to such an important task.

After Asad Umar’s exit as finance minister, SPL became dormant and out of eight members, six resigned from their positions. Those who resigned included Kamran Y Mirza, Musharraf Hai, Babar Badat, Nadeem Babar, Ehsan Malik (chairman) and Waqar A Malik.

But official record of the Ministry of Finance tells a different story. The six directors resigned due to the lack of legitimacy and empowerment of the board.

“The company has no funds, employees or office at present, neither has it started functioning. Yet, expectations from it are high,” wrote Ehsan Malik, then chairman of SPL, in his resignation letter addressed to the finance adviser.

“The way things stand today, it seems that privatisation of SOEs may just be the route now under consideration of the government rather than adopting the policy objectives of SPL,” according to Babar Badat’s resignation letter - another former board member.

The PTI government had incorporated SPL in February 2019 to restructure and revive loss-making enterprises. Its terms of reference (TORs) included “direct, supervise, oversee and coordinate the management of subsidiary companies”. The Cabinet Committee on SOEs has been tasked to oversee the work of SPL, which is headed by Shaikh.

Umar wanted to restructure the loss-making enterprises but the government took a U-turn after Shaikh became the finance adviser. Shaikh revived the stalled privatisation programme but in the past one year nothing moved forward.

Kamran Mirza resigned in July last year whereas Musharraf Hai tendered resignation in June last year. In the resignation letter, Hai raised the question of legitimacy and empowerment of the company to deliver the intended objectives.

Former board members had demanded that the company could only be given legitimacy through an Act of parliament. They also sought indemnity for decisions taken in good faith.

To another question, whether the government had plans to revive SPL, Anwar Sheikh said only finance adviser and finance secretary could answer these questions.

Published in The Express Tribune, August 7^th, 2020.

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