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The government has finalized the sale of a business unit from Pakistan International Airlines (PIA) to the Pakistan Air Force, with a payment of Rs2.5 billion in cash, which is just a quarter of the bid proposed for a 60% stake in the airline.
The aggregate sales value of Precession Engineering Complex (PEC) amounts to Rs6.5 billion, which encompasses Rs4 billion attributed to pension-related obligations for both current and retired employees.
Previously, a four-member ministerial committee, presided over by Finance Minister Muhammad Aurangzeb, has sanctioned the framework for the transfer of the PEC to the Pakistan Air Force (PAF). A formal summary will be submitted to the federal cabinet shortly for final approval.
The ministerial committee, comprising the ministers of defense, aviation, and privatization, was assigned the responsibility of finalizing the transfer of assets, liabilities, and human resources to the PAF.
A sub-committee, chaired by the additional secretary of corporate finance, evaluated the assets and liabilities, ultimately ascertaining the total value to be Rs6.5 billion through the application of the discounted cash flow methodology. This encompasses land, infrastructure, apparatus, equipment, and human capital.
The Pakistan Air Force (PAF) will create a dedicated entity to manage the transaction. Employees will maintain their existing contractual terms, encompassing remuneration, allowances, medical services, and pension entitlements. Furthermore, PAF will obtain funding to support the continuous operations at PEC.
The government’s recent initiative to privatize Pakistan International Airlines (PIA) was failed, as five out of six prospective suitors retracted their offers. Ultimately, only one vendor submitted a proposal of Rs10 billion, which was significantly below the reserve price of Rs85.03 billion.
Privatization Minister Abdul Aleem Khan has expressed his disapproval of the caretaker government’s flawed privatization framework, which has resulted in Pakistan International Airlines (PIA) incurring negative equity of Rs45 billion, notwithstanding the transfer of Rs 623 billion in liabilities.
Despite the challenges encountered with PIA, the finance ministry adeptly negotiated a Rs2.5 billion agreement for PEC, which was burdened with negative equity amounting to Rs1.73 billion. The assets of PEC comprise real estate valued at Rs199 million, spare parts amounting to Rs154 million, and trade receivables totaling Rs742 million. Conversely, the liabilities encompass employee obligations of Rs1.1 billion and trade payables of Rs1.8 billion.
