Argues it had failed to pay tax refunds of Rs400m after PAFL acquisition in 2006. CREATIVE COMMONS
The Privatisation Commission (PC) has decided to stop a consortium of Fatima Trading Company, owned by billionaire Arif Habib, from bidding for National Power Construction Company (NPCC) on grounds that the company had violated a privatisation accord of 2006.
A three-member committee of the PC board agreed that the Fatima Group, in 2006, acquired a 94.6% stake in Pakarab Fertilizer Limited (PAFL) at a price of Rs14.2 billion, but did not pay around Rs400 million to the government on account of PAFL tax refunds.
According to the findings of the committee, the conduct of PAFL and its acquiring consortium has not been in conformity with their mutually-agreed responsibility. The consortium comprises Fatima Trading Company, Fatima Fertilizer Company, Fatima Holding Limited and Fazal Cloth Mills Limited.
The PC is apparently discriminating against the Fatima Group, as it has not disqualified the consortium of Habib Rafiq and Frontier Works Organisation (FWO). Under the privatisation law, a government-controlled entity cannot bid for any privatisation transaction and the FWO is controlled by the Ministry of Defence.
Although the FWO’s net worth is Rs30 billion as compared to only Rs3 billion of Habib Rafiq, the FWO holds a minority stake of 49% in this consortium.
“The PC has not done justice, as it has taken the decision without giving an opportunity to us to present our position,” said Fatima Group Chairman Arif Habib, while talking to The Express Tribune. He did not rule out the possibility of knocking the door of the court against the PC decision.
In 2014, the Arif Habib Group’s net worth was Rs60 billion. Before taking the decision, the committee heard the Fatima Group, according to the PC. It said the commission wanted to give a strong message to the market that defaulters would not be allowed to take part in the bidding.
The PC insisted that the FWO was registered with the SECP and is treated as a private company. It said the FWO was a minority partner in the consortium.
After the committee’s decision, the PC circulated a summary to members of the board, seeking their approval to disqualify the consortium of Fatima Group, said PC sources.
A senior official of the PC said the commission was running out of time, therefore it sought members’ consent through the summary. He said the rules allow the commission to seek the members’ consent through this medium.
On May 8, the PC board had approved the pre-qualification of eight parties including the consortium of Fatima Group for further participation in the process for acquiring a minimum 88% of government’s shares in NPCC.
The government is eager to sell the entity within the next three weeks and to claim the second strategic sale in a year for roughly Rs2 billion.
Under the sale purchase agreement of 2006, the Fatima Group was to pay 90% of any amount being refunded by the Federal Board of Revenue to the PC within one week of such receipt.
In 2006-07, PAFL received Rs334 million from the FBR but paid only Rs94 million to the PC, according to the committee findings. Similarly, it received another Rs214 million in 2012 and 2014 but did not pay a penny to the PC.
“In our views, the government paid an excess amount to the previous shareholders,” said Habib while defending the decision to withhold the amount.
But the PC board committee said PAFL unilaterally withheld Rs330 million on the pretext that the government paid the amount in excess to previous shareholders of PAFL.
After the disqualification of the Fatima Group, seven bidders are left to compete for NPCC. The company is doing business in Saudi Arabia and does not have a presence in Pakistan. Sinohydro Corporation is also bidding for NPCC and its net worth is estimated at Rs97 billion.
The other significant consortium is of Ascon Contracting and Batterjee Holding and its net worth is Rs86 billion.
Published in The Express Tribune, June 12th, 2015.
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