Regulator objects to PASSCO's winding up

ECC directs food ministry to resubmit summary after addressing highlighted issues

ISLAMABAD:

The Economic Coordination Committee (ECC) has rejected a summary for the potential winding up of Pakistan Agricultural Storage and Services Corporation (Passco) and the establishment of a special purpose vehicle (SPV) following objections raised by the Securities and Exchange Commission of Pakistan (SECP).

In a recent meeting, the Ministry of National Food Security & Research shared the background of the proposal while SECP pointed out that the Memorandum and Articles of Association should be vetted by the Law and Justice Division and the authorised capital be reduced from Rs350 billion to Rs5 billion since the task of the new entity would only be to wind up Passco.

ECC directed that a summary should be presented to the committee after addressing the issues discussed during the meeting. It told the food security ministry to resubmit the summary in the next huddle after addressing and incorporating the issues such as examination of the Memorandum and Articles of Association by the Law Division. It also gave the directive to revise the authorised capital to only Rs5 billion.

The Ministry of National Food Security briefed the forum that Passco, a public limited company incorporated under the Companies Ordinance 1984 (now Companies Act 2017), was established with the mandate of procuring wheat for maintaining national reserves.

In the backdrop of the redefined role of the federal government, the Prime Minister's Office, through directives dated September 12, 2024 and March 21, 2025, called for winding up Passco after consultation with stakeholders and advised the development of an alternative mechanism for maintaining strategic wheat reserves. Thereafter, the PM Office, vide its directive issued on August 25, 2025, assigned the finance minister the task to lead the winding-up process in consultation with the food ministry.

In that regard, the committee headed by the finance minister held five meetings in September and October 2025 to deliberate on the modalities of disposing of wheat stocks, settling Passco liabilities and its eventual winding up. Among other matters, the settlement of Passco receivables from recipient agencies, including the federal and provincial governments, and its liabilities to creditors amounting to Rs527.664 billion were extensively discussed.

It was projected that after adjustments through wheat sale proceeds, realisation of dues from recipient agencies and disposal of assets, a residual liability of Rs121 billion would have to be settled for closing the balance sheet.

The food ministry said that as the residual amount could not be immediately covered through budgetary resources, it was decided that an SPV, under Section 32, should be incorporated to raise long-term financing from banks under the government's sovereign guarantee. The proceeds will be used for the settlement of Passco liabilities to creditor banks. The federal government will service debt obligations of the SPV through annual budgetary allocations over five to seven years in line with the amortisation schedule to be agreed with lenders.

The food ministry sought approval for setting up the SPV, named Wheat Stocks Management Company Public Limited, under the Companies Act 2017 with initial paid-up capital of Rs1 million and authorised capital of Rs350 billion. The objective of the new company will be to raise long-term financing from banks with government guarantee and the stipulation that funds would be utilised to settle Passco's left-over liabilities.

It also sought the green light to prepare and submit draft incorporation documents for the SPV, including its Memorandum and Articles of Association. The ministry requested ECC's nod for issuing a notification in the official gazette in terms of Seventh Schedule of the Companies Act 2017 to prescribe an incorporation fee of Rs10,000 for the proposed SPV, being a wholly owned government company, irrespective of its authorised share capital.

It asked for approval to meet incorporation-related expenditures of the SPV, including the name, reservation fee, filing fee and other statutory charges, and the paid-up capital from budgetary allocations through re-appropriation within the food ministry.

It requested for exempting Wheat Stocks Management Company from provisions of the State-Owned Enterprises (Governance and Operations) Act 2023 in terms of Section 3(1)(c) read with Clause 5 of the State-Owned Enterprises (Ownership and Management) Policy 2023, being an SPV with no commercial operations.

Upon fulfilment of its mandate, the SPV will be dissolved through self-liquidation in accordance with Section 347 of the Companies Act 2017.