New lifeline: Government bails PIA out yet again

Dar expresses anger at poorly-crafted summary for the package.

Shahbaz Rana July 12, 2013
ECC approved the payment of Rs7 billion to PIA, aimed at preventing the airline from defaulting on its international commitments. CREATIVE COMMONS

ISLAMABAD: Despite strong reservations over the ‘half-baked’ summary tabled by the management of Pakistan International Airlines for a multibillion-rupee lifeline, the Economic Coordination Committee of the Cabinet (ECC) approved on Friday yet another Rs7 billion bailout package for the national flag carrier.

According to officials who attended the ECC meeting, Finance Minister Ishaq Dar grilled Adviser to the Prime Minister on Aviation Capt (retd) Shujaat Azeem for bringing a poorly-crafted summary for the bailout package. They told The Express Tribune that the PIA management was unclear about whether they needed Rs16 billion or Rs24 billion in immediate relief.

But that was not all that was wrong. The airline’s management also violated the rules of business while presenting the summary before the ECC. Contrary to the requirement of circulating a summary among ministries and divisions concerned for their input before the meeting, the summary was circulated after the meeting, denying stakeholders the chance to give their opinion in writing.

Despite this, the committee approved the payment of Rs7 billion to PIA, aimed at preventing the airline from defaulting on its international commitments.

According to an official handout, PIA will use the money for payments to international vendors. The airline’s management had sought the lifeline to fulfill debt obligations and lease 10 narrow-body aircraft.

The approval of the bailout package means the finance ministry will have to issue a Rs7 billion supplementary budget, since no allocation for covering PIA’s losses was made in the federal budget for 2013-14. This will widen the federal budget deficit by the same amount, inviting scrutiny of the IMF.

Meanwhile, the ECC deferred the decision on another Rs8 billion for federal excise duty payments to the Federal Board of Revenue until the board and PIA resolve their outstanding issues. The airline had collected this tax from passengers but never deposited it with the government, according to officials. They said Dar grilled the PIA management on this issue as well and termed it a criminal act.

The officials said the committee also reviewed the possibility of privatising PIA, whose aggregate losses have crossed Rs200 billion. The airline’s management has proposed selling 26% of the shares of the entity, along with administrative control. It tried to justify the bailout as an upfront cost before PIA is privatised.

The ECC, however, did not take a decision on privatising the airline and asked the management to bring a revised, ‘well-prepared’ summary and business plan in this regard.

Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi supported the idea of privatising PIA, said the officials. Abbasi also criticised the PIA management for the poor quality of the summary.

Published in The Express Tribune, July 13th, 2013.

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