The government is likely to hand over control of Pakistan Machine Tool Factory (PMTF) – a parts producer for missile launchers and submarine systems – to Pakistan Ordnance Factory (POF).
According to officials of the Ministry of Industries and Production, the country’s economic managers have turned down the ministry’s plea for a bailout package for the sick unit – burdened with liabilities of billions of rupees – like the way assistance was provided to Pakistan Steel Mills.
The economic managers, in a meeting of the Economic Coordination Committee (ECC) held on June 17, were informed that POF had expressed interest in acquiring PMTF and it had completed the technical due diligence of PMTF and the tax and financial due diligence was under way.
ECC Chairman Ishaq Dar, who is also the finance minister, underlined the need for completing the due diligence process and stepping up privatisation of the enterprise.
He suggested that POF might consider inclusion of post-retirement liabilities of PMTF’s employees in overall cost of the transaction.
Planning, Development and Reform Minister Ahsan Iqbal stressed that the list of state-owned enterprises proposed for privatisation should be strategically reviewed so that only those enterprises were sold off that were not profitable. Responding to that, the ECC chairman said the matter would be discussed comprehensively by the Cabinet Committee on Privatisation.
Considering the summary submitted by the Ministry of Industries that sought a bailout package of Rs1.477 billion for PMTF rehabilitation, the ECC had earlier directed the Privatisation Division to bring another summary after consultation with the stakeholders.
In the meantime, the ECC approved Rs96 million on March 19 on the recommendation of the Privatisation Division for paying salaries to PMTF employees for three months from January to March 2015.
The Privatisation Division, however, proposed a bailout package of Rs1.381 billion for the rehabilitation of PMTF including Rs558 million for working capital and Rs823 million for personnel-related dues.
PMTF has suffered a loss of about Rs2.261 billion. On June 30, 2014, its liabilities were Rs3.657 billion that rose to around Rs3.794 billion in April 2015.
The profit and loss statement of PMTF indicates that the company has not been able to utilise its resources appropriately and has gradually turned into a loss-making enterprise.
The Privatisation Division cautioned that the bailout package was not advisable at this stage keeping in view PMTF’s financial performance for the last many years and its impending privatisation.
Moreover, due to financial constraints, PMTF has not been able to pay dues to 508 retired employees since 2008 including the 37 retired employees who have passed away.
Under these conditions, it was not possible for the company to even pay salaries to its existing employees.
The Ministry of Industries asked the ECC to approve the release of Rs823 million for clearing the outstanding claims of PMTF’s retired employees on humanitarian grounds and another Rs96 million for paying salaries to the employees for the period April to June.
Furthermore, it should be ensured that the funds extended to PMTF were strictly utilised for only paying the dues of employees.
The ECC approved Rs64 million for paying salaries to the employees for April and May 2015.
Published in The Express Tribune, June 25th, 2015.