Setback to sell-off policy

The first serious attempt to privatise PIA ended in a fiasco. Six bidders were shortlisted, but five of them backed out, leaving one in the race. And shockingly, the offer the lone bidder, Blue World City, made was only 12 per cent of the Rs85 billion price-tag set by the Cabinet Committee on Privatisation for 60 per cent shares in the national flag-carrier. The lone bidder refused to raise his bid saying that the quoted price was in "accordance with our assessment" for the airline with "significant leakages".

This effectively stalled the PIA sell-off plan. The blame for the botched plan should be equally shared by politicians and the bureaucracy. The system, too, could not ensure a conducive environment to encourage all potential buyers to stay in the race till the biding day. Vilification of investors might also have deterred the interested parties in addition to a lack of flexibility from the government on some tax-related matters.

Choosing Blue World City, a real estate developer with little experience in aviation business and having no industry partner in the consortium, as a bidder also raises questions on the entire selection process. Ernst & Young, hired as financial advisor for nearly Rs2 billion, also seemingly failed to perform due diligence, shortlisting a party that may not have met the criteria to qualify. This was notwithstanding that at one stage the privatisation minister had dismissed Blue World City as a "non-serious" party.

The government had assumed the responsibility of PIA's Rs625 billion debt believing it might facilitate the privatisation process, but it did not. Now concerns are rampant that the government may abandon the PIA sell-off plan, as the airlines' monthly losses would be far lower after subtracting the Rs625 billion debt-servicing cost from the balance sheet. The government needs to immediately put its house in order, strengthen the Privatisation Commission, empower the concerned ministers, and start the process anew. The fiasco should not serve as an excuse to give up privatisation of PIA and power sector.