PIA’s privatisation: Government gives fresh commitment to IMF

Published: August 5, 2015
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“PIA’s transaction structure will be formalised within a month and shared with the Ministry of Law for vetting.” PHOTO: REUTERS

“PIA’s transaction structure will be formalised within a month and shared with the Ministry of Law for vetting.” PHOTO: REUTERS

“PIA’s transaction structure will be formalised within a month and shared with the Ministry of Law for vetting.” PHOTO: REUTERS Says it will sell stake in national carrier by March next year, discussion held during eighth review of EFF. PHOTO: FILE
ISLAMABAD: 

Amid divisions within its ranks on the issue of privatisation of Pakistan International Airlines (PIA), the government has given a fresh commitment to the International Monetary Fund (IMF), promising it will sell the national carrier to a strategic investor by March next year.

“The timelines to sell a minimum 26% of PIA shares were discussed during the on-going eighth review of the $6.6-billion Pak-IMF programme,” said Privatisation Commission Chairman Mohammad Zubair while talking to The Express Tribune.

Read: PAC partially endorses PIA privatisation plan

He said the government stands committed to completing the privatisation transaction by March next year. “PIA’s transaction structure will be formalised within a month and shared with the Ministry of Law for vetting.”

He hoped that the transaction structure would be taken to the Cabinet Committee of Privatisation for approval next month.

“The government had faced certain legal obstacles in finalising the transaction structure, which have now been resolved,” added the Chairman. He did not comment on whether the government would offer 26% stakes to a strategic investor or sell majority shares.

Under the IMF programme, the government is bound to sell at least 26% shares of PIA to a strategic investor. But it is facing resistance from opposition parties, particularly the Pakistan Peoples Party (PPP), which is opposed to the privatisation of PIA and Pakistan Steel Mills (PSM).

The Commission has already hired a consortium comprising Dubai Islamic Bank, IATA Consulting, Deloitte, HaidermotaBNR, Freshfields Bruckaus Deringer, Abacus Consulting, APCO and Prestige as Financial Adviser (FA) for the transaction.

The IMF programme document states that the government has to complete the transaction by December this year. But Zubair said the December deadline was for soliciting bids from prospective bidders.

He said there was a misunderstanding on IMF’s part that took the deadline of soliciting bids as the time limit to privatise the entity.

The original deadline to privatise the PIA was December last year, which has thrice been revised.

While the government claims that it would be able to complete the transaction by March next year, circumstances suggest that it would be very difficult to do so. The chairman admitted that any unusual event may push the deadline ahead.

PIA and PSM are the two main public sector enterprises that are causing huge losses to the exchequer. The service delivery by the PIA also remains poor, providing a reason to the government to hand over its control to strategic investors.

According to the audited financial statement for January-March period this year, the accumulative losses of the airline increased to Rs228.7 billion – a net addition of Rs2.1 billion in three months. The total liabilities grew to Rs329.7 billion as of March this year while its assets were recorded at Rs186.7 billion.

Divided government

Despite giving a commitment to the IMF to privatise the entity by March next year, the government has not yet resolved inter-ministerial differences, according to the sources.

Adviser to Prime Minister on Aviation Captain (retired) Shujat Azeem is said to be in opposition to the privatisation.

He is in favour of restructuring and revival of the entity and under the same strategy, PIA is in the process of acquiring ten narrow-body aircraft, five ATRs and two wide body aircraft on lease. Few of these planes have already joined the fleet.

Read: IMF approves release of $501.4 million to Pakistan

Under the privatisation law, if an entity is to be privatised it has to be placed under the administrative control of the Privatisation Commission. However, PIA is still under control of the Aviation Division, said PC officials, indicating that the Commission was facing resistance. Unlike the PIA, the PSM is under the administrative control of the commission.

The sources said the issue of Aviation Division’s opposition to PIA privatisation has been taken up with Minister of Finance Ishaq Dar. They added that the matter would now be discussed to find a solution, and if left unresolved could derail the privatisation process.

Published in The Express Tribune, August 5th, 2015.

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Reader Comments (12)

  • Bewildered
    Aug 5, 2015 - 9:37AM

    Please sell PIA ASAP to whoever is willing to buy it and spare the nation tens of billions of rupees annually. However, keep the PIA Investment Holdings who owns the hotel Roosevelt in New York.Recommend

  • Pakistani
    Aug 5, 2015 - 11:36AM

    Get virgin airlines in on a 3 year management contract. We need to over haul everything, from staff in offices to cabin crew. The airline needs to professionalise. The planes need to be made cleaner. Excess in competent staff rationalised. Passengers need to be taught how to travel in planes and how their children should behave.

    We can do it, it’s possibleRecommend

  • Atif
    Aug 5, 2015 - 3:21PM

    PIA has been destroyed by political parties starting from 1980s zia regime. Although it is a difficult step but it will be better than a government controlled PIA where VIPs even cancel/delay flights as per their illegitimate wishes.

    Hoping for a PPP, PML-N, MQM free PIA.

    This might be an opportunity for the airline to return to its former glory.Recommend

  • Atif
    Aug 5, 2015 - 3:22PM

    PIA is causing huge losses to the country so it needs to be fixed.Recommend

  • Irshad.K
    Aug 5, 2015 - 3:47PM

    Which relative of Nawaz Sharif is buying PIA.Recommend

  • Lolz
    Aug 5, 2015 - 4:42PM

    PML-N will never learn a lesson from Greece! IMF will make you sell out each and every corner of this country and PML-N will not hesitate to privatize the whole Pakistan! Interestingly, Ishaq Dar innocently admits in front of the whole nation that they have committed to IMF which is a profit oriented institution, which reflects their commitment towards their own country! Surprisingly the whole nation is still silent! Lolz Recommend

  • Aviator
    Aug 5, 2015 - 4:53PM

    Government should sell the PIA and used the proceeds for betterment of country. PIA’s accumulated loss has surpassed USD 1 billion. If the same amount had been invested in power it would have produce 1,000 MW of electricity which can contribute to job creation.
    Take the case of Pak Steel which is in ICU. Had it been privatised it would have been in a much better position and will be contributing to national economy through job saving/creation and paying taxes. The Mafia which is the beneficiary of status quo is using catchy terms of “national assets” to protect their interest. Recommend

  • Voice of Pakistan
    Aug 5, 2015 - 6:47PM

    PIA is overflowing with sifarshi people

    from interior sinneed. They have

    just one goal:Loot n LootRecommend

  • Faraz
    Aug 5, 2015 - 8:44PM

    Why does IMF go around the world asking governments to nationalise their assets? The governments will inevitably become poorer without income producing assets. IMF has an underhanded agenda for the third world. Recommend

  • Aam Admi Bechara
    Aug 5, 2015 - 9:02PM

    Wadera Corruption Party turned PIA into a wadera ruled goth where only sindhis can be

    given jobs. They have looted this airline to its last bone and continue devouring it.Recommend

  • Parvez
    Aug 6, 2015 - 12:23AM

    The sad part is that the IMF knows the government is lying…..but lending to governments like our must be so profitable that the IMF plays deaf.Recommend

  • unbelievable
    Aug 6, 2015 - 2:47AM

    Where is the value in PIA? It’s small, has deficit equity, and produces enormous financial losses. The planes that do operate are leased rather than owned and most of those are not very new. The only money makers are non airline related (hotels etc), it’s overstaffed and loaded with military and govt cronies, and has a powerful union. Nobody outside of Pakistan will fly this airline and the Pakistani’s think the service is terrible. Who wants to buy that?
    .
    IMF would be happy if Pakistan just stopped spending money on this dead horse. Recommend

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