IMF’s condition: Govt backs selloff plan, 31 public entities cited

Decides to sell one-fourth or more shares of institutions including PIA and Pakistan Steel.


Shahbaz Rana October 03, 2013
PIA will be among half a dozen entities that have to be privatised by December 2014 as part of the IMF condition. PHOTO: FILE.

ISLAMABAD:


The government on Thursday approved to sell 26% or more shares of 31 state-owned entities including Pakistan International Airlines (PIA) and Pakistan Steel Mills (PSM) – to fulfill a key condition of the International Monetary Fund’s (IMF) $6.7 billion bailout programme. 


The list was approved by Cabinet Committee on Privatisation (CCOP), three days after expiry of September 30 deadline set by the IMF for giving a detailed plan for these entities aimed at turning around  the loss making firms and reducing the government’s footprints.

Privatisation Commission had tabled a list of 30 items but the CCOP – headed by Finance Minister Ishaq Dar – added Lakhra Power Plant at the eleventh hour. Lakhra’s privatisation would be subject to approval by the Council of Common Interest (CCI), as the plant was not among the 65 entities that the CCI had earlier approved for privatisation and restructuring.



Last month, the Supreme Court of Pakistan had struck down the Lakhra Power Plant’s 20 years’ lease to M/s Associated Group after finding faults in the lease agreement. The apex court had declared the lease as illegal and void and directed the federal government to conduct an inquiry to fix civil and criminal liabilities on beneficiaries in accordance with law.

Among the approved 31 entities are the PIA, the PSM, Pakistan State Oil, Islamabad Electricity Supply Company and Gujrawanala Electricity Supply Company. The government has already announced to sell 26% stakes of the PIA to a strategic partner but the inclusion of the PSM was a surprising one.

Earlier, the government had announced to restructure the loss making entity instead of privatising it after the main opposition party in the National Assembly threatened to launch a country wide strike.

According to a Finance Ministry official, it was not necessary that the government will privatise all the 31 enterprises. He said the approval was given in bundle and after Eid the Privatisation Commission will bring a list of half a dozen among 31 entities that could be privatised on fast track basis. However, the PIA will be among half a dozen entities that have to be privatised by December 2014 as part of the IMF condition.

“The future of the employees and political backlash against the privatisation will be key determinants for reaching a decision of full or partial privatisation,” the official said.

The CCOP directed the Privatisation Commission to ensure that the interests of employees were to be protected at all cost, according to a handout of the Ministry of Finance.

He said it was also not necessary that the government would sell only 26% shares. There was possibility that on case to case basis the government might sell majority shares to the private parties if the strategic partners refused to take management with minority shares.

A federal minister, who attended the meeting, also showed apprehension that the strategic partners might not like to take management control with minority shares.

“However, in case the bidder seeks majority shares, the entity will again be brought in front of the CCOP for fresh approval,” he added.  The CCOP approved four-pronged plan for these entities that revolved around off loading shares in the stock market, handing over management control to the private sector, divestment and selling assets where necessary.

The government will offload shares of Oil and Gas Development Company Limited, Pakistan Petroleum Limited, Pakistan State Oil, Habib Bank Limited and Untied Bank Limited, as these entities were already registered in the stock markets.

The CCOP may decide either to handover management control of National Insurance Company Limited or issue Initial Public Offering (IPO) at stock market. Islamabad Electricity Supply Company and Gujrawanala Electricity Supply Company would be offered for strategic partnerships.

“Despite approval for privatisation, there is a possibility that the PSM will be restructured given the opposition to its privatisation,” the officials said.


Published in The Express Tribune, October 4th, 2013.

COMMENTS (33)

H Chaudhry | 8 years ago | Reply

@Sexton 47 million Americans on food stamps are number of people and NOT number of households. Take a family 11 on food stamp for example. Atleast they have food stamps that they paid in to through their work? What do you expect Government to keep FEEDING people?

What exactly are you suggesting here? Government run businesses, provide jobs and do every thing for people? Where will the money will come from. Do you understand in Pakistan, the railways, steel mills and PIA are bing funded from debt from IMF and not from private equity.

The budgetary problems in US has nothing to do with privitization. You contine to mix theories and as I said, take a step back and try to get handle on at least one of them. Free markets have allowed the US to actually have most millionairs in the world, a single largest middle class. In free markets, you take risk and you have return, people make poor choices and they pay for it! What it has to do with Privitization? If anything US budget crisis tell us is that Government should totally stay out of private businesses. The european model of semi partial welfare state is miserably failing. See examples of UK's NHS etc.

Long story short, you are really confusing many theories here. Privitizaiton in Pakistan has nothing to do with what is happening in the US. The US economy, where it is today is because of free markets. The Free markets breed competition, the fittest survive and the whole society move forward. When Governments become mothers, run businesses, let people have jobs for eternity, have pensions systems that are unbearable, economy stalls like in Pakistan. Do yourself a favor, get an understanding of free markets. BTW if US economy is such a bad thing, why do most of us come here and stay here?

Sexton Blake | 8 years ago | Reply

@H Chaudhry: Dear H Chaudhry, It is quite obvious that you deliberately misinterpret available facts to suit your particular argument, which appears to change quite rapidly, and you ignore other facts if they do not support your changeable theories. For example, you originally stated that not many Americans were on food stamps. Now you are saying that 47 million Americans are on food stamps, but they are not doing too badly. I personally, hope my situation does not get so bad that I have to live on US food stamps. Interestingly, have you been keeping in touch with the current US budgetary problems? Perhaps the problems are due to the fact that America, the home of private enterprise, has a debt level in excess of 60 trillion dollars, and unfunded liabilities well over 200 trillion dollars. In other words, America is broke and cannot pay its bills. However, I will not say any more, because you may accuse me of mixing more economic theories.

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