The Privatisation Commission (PC) board on Thursday approved a minimum sale price of Rs2.25 billion for Services International Hotel - another real estate transaction - as all the major privatisation transactions are falling behind deadlines. Headed by Privatisation Minister Mohammad Mian Soomro, the PC board approved the Rs2.25 billion reference price to sell the hotel, said a ministry official after the meeting.
The government has determined the value of the hotel on the basis of market value as it found the Residual Land Value approach inconsistent due to different approaches by the valuators. The transaction committee had recommended a reserve price of Rs2.2 billion for the sale of the hotel.
However, privatisation ministry spokesperson Samreen Zehra said the board had not yet set the final price of the hotel and the matter would be taken to the Cabinet Committee on Privatisation (CCOP) for final decision.
She said that the board considered the price recommended by the transaction committee and some board members also recorded their views on the reference price.
Six potential investors have pre-qualified for the bidding stage and due diligence has already been completed. The government wants to sell the hotel this month as it struggles to show a meaningful privatisation transaction during its over two-and-a-half-year tenure.
Earlier, the government had sold 23 properties at a total cost of Rs1.11 billion. However, only 10 buyers submitted the bid money of Rs920.8 million in respect of 10 auctioned properties.
The board was informed that bidders for 13 properties failed to deposit the sale proceeds and these properties would be auctioned again.
The government has undertaken about 16 privatisation transactions, but all of these are falling behind schedule.
Privatisation of two liquefied natural gas (LNG)-fired power plants is the biggest transaction, which the government expects will fetch $1 billion to $1.5 billion. However, the PC board was informed that due diligence by investors has been halted.
The government has also set up a committee to resolve the pending issues. It has resolved the issue of take-or-pay framework to free prospective buyers from buying Qatar LNG.
However, the issue of financing the debt component of a privatisation deal has not yet been sorted out. Tax-related matters of the LNG power plants have also not been fully addressed, according to the privatisation ministry officials.
The board was told that the bidders would be re-engaged in order to complete the due diligence process only after the resolution of different issues.
Investors have also pre-qualified for the purchase of SME Bank. But the potential investors have not yet indicated their conveyance for the definite date of bidding.
The board reviewed the privatisation status of Pakistan Steel Mills (PSM). The government has already approved its transaction structure, which envisages the sale of the mill through a subsidiary.
The government is still in the process of finalising the scheme of arrangement for filing with the Securities and Exchange Commission of Pakistan (SECP). Different issues such as the status of a jetty at Port Qasim, land lease agreement between PSM and the new subsidiary and utility connections remain pending.
The privatisation minister was holding weekly review meetings to address the outstanding issues, said the ministry’s spokesperson. She said that the PC board appreciated the progress on the PSM transaction.
The board rejected a PC summary that sought 25% disparity allowance for its employees, which the federal government had approved for 58 departments. The Ministry of Privatisation and the PC were not included in the list.
The board was of the view that increasing salaries of government employees did not fall within its mandate.
The government has notified the disparity reduction allowance with effect from March 2021 for those civil employees of BS-1 to BS-19 grades of the federal government who had never been allowed additional salary equal to or more than 100% of the basic pay (whether frozen or otherwise) or performance allowance.
Published in The Express Tribune, March 12th, 2021.
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