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ISLAMABAD: Privatization Minister Abdul Aleem Khan stated on Monday that Pakistan International Airlines (PIA) could not be sold due to a lack of cooperation from the Ministry of Finance, which refused to accommodate the legitimate demands of the bidders.
He also said that the temporary government was to blame for completing a bad privatization deal structure that left the PIA with negative equity of Rs45 billion even though it had taken off liabilities of Rs 623 billion.
Even Gulf countries wouldn’t buy PIA’s “dirt” if it didn’t clean its balance sheet of negative equity first, according to Aleem Khan, who spoke before the Senate Standing Committee on Privatization.
He said that the government and relevant authorities had ignored the bidders’ requests for an exemption from the 18% sales tax on aircraft leases and the cancellation of additional liabilities of Rs45 billion.
The PML-N Senator Tallal Badar Chaudhry presided over the committee meeting. “We could not write off Rs45 billion worth of liabilities without the consent of the finance ministry,” Aleem Khan remarked, describing the rigid Federal Board of Revenue (FBR).
“I recommended the government to accept the bidders’ requests but it did not listen,” the minister of privatization stated.
A real estate developer was the only bidder the government considered while selling PIA; their offer was Rs10 billion, but it was not enough to meet the minimum reserve price of Rs85.03 billion.
According to Privatization Secretary Usman Bajwa, who addressed the committee, the bidders requested that the government consider writing off Rs26 billion in tax arrears, Rs10 billion in bridging funding from the Civil Aviation Authority to PIA, and Rs9 billion in other liabilities.
He further mentioned that one of the proposals was to transfer PIA’s commercial plot, which is worth more than Rs10 billion, from a holding company to the airline.
According to Usman Bajwa, the FBR turned down a request to write off Rs26 billion in tax liabilities and waive an 18% sales tax on aircraft leases since doing so would hurt the IMF program.
“It was not difficult for the government to accept these two requests and I also tried to convince them at the top-most level,” Aleem Khan stated.
“We briefed the IMF that because of these two conditions, the privatization failed” on Thursday, according to Bajwa, and now the government is requesting that the IMF waive sales tax and write off Rs45 billion in liabilities.
“The IMF has listened to our demands and said that it would give a reply after internal consultations,” according to him.
The privatization minister stated that Prime Minister Shehbaz Sharif had discussed the purchase of PIA with the leaders of several countries during the previous several days. “Until the balance sheet numbers are positive, no private company or a foreign government will invest in it,” claimed the CEO.
According to the privatization secretary, Abu Dhabi Ports expressed initial interest, and “we are engaging with it” following the prime minister’s discussions with Gulf state leaders.
According to him, the Privatization Commission is considering both market-based and government-to-government deals as potential avenues for selling assets.
“We have learned our lesson and PIA cannot be sold without completely cleaning the balance sheet from all liabilities,” stated the minister responsible for privatization.
After the government removed Rs623 billion and placed it in a holding company, Tallal Chaudhry argued that there was no reason to keep Rs45 billion in liabilities on the PIA balance sheet.
According to the federal minister, Ernst & Young’s performance as PIA’s financial consultant was inadequate, both in terms of cooperation and feedback.
The privatization secretary stated that the government had spent roughly Rs2 billion to employ the consultant, with only 27% of that amount due after bidding.
