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Tuesday April 23, 2024

Caretaker govt won’t be able to privatise PIA, outsource airports

The deadline for outsourcing the airports was extended up to March 15, 2024

By Mehtab Haider
January 26, 2024
An airplane of the national flag carrier of Pakistan is seen in this photo. — AFP/File
An airplane of the national flag carrier of Pakistan is seen in this photo. — AFP/File

ISLAMABAD: The caretaker government will be unable to privatise the national flag carrier Pakistan International Airlines (PIA) and outsource airports to potential foreign investors before the next general elections.

The deadline for outsourcing the airports was extended up to March 15, 2024. Earlier, efforts were underway to go ahead within the tenure of the caretaker setup.

The Election Commission of Pakistan (ECP) has given direction to the caretaker government to refrain from privatising PIA and left this issue to the upcoming government. However, the Ministry of Finance was making last ditch efforts to segregate PIA and resolve the restructuring of outstanding loans. It is expected that the government might hold an important meeting with banks within the next few days to convince them to re-profile PIA’s outstanding debt at a manageable rate of markup.

But the ECP, in its directive to the government, stated that under Section 230 of the Elections Act, 2017, the caretaker government’s primary responsibility is to assist the Election Commission in holding the elections by the Constitution and law and also to perform its day-to-day functions required to run the affairs of the government.

Under sub-clause (0) of Section 230 (1) of the Elections Act 2017, the caretaker government must restrict itself to activities that are routine, non-controversial and urgent in the public interest and reversible by the future government elected after the elections.

In the same vein under clause 2 of Section 230 of the Elections Act:- (2) The caretaker government shall not take major policy decisions except on urgent matters; take any decision or make a policy that may have an effect or pre-empt the exercise of authority by the future elected government; enter into a major contract or undertaking if it is detrimental to the public interest; enter into major international negotiation with any foreign country or international agency or sign or ratify any international binding instrument except in exceptional cases.

Later, on vide an amendment to the Elections (Amendment Act) 2023) the following proviso was added, “Provided that sub-sections (1) and (2) shall not apply where the caretaker Government has to take actions or decisions regarding existing bilateral or multilateral agreements or the projects already initiated under the Public Private Partnership Authority Act, 2017 (VIII of 2017), the Inter-Governmental Commercial Transactions Act, 2022 (XXX of 2022) and the Privatization Commission Ordinance, 2000 (LII of 2000)”.

Understandably, under the said proviso several important privatization transactions are being undertaken which include key assets such as PIA and its affiliated properties, Heavy Electrical Complex (HEC) and others.

While the privatisation of loss-making assets is an important way of cutting budgetary deficiencies, it may be appreciated that these actions will vitiate the spirit of Section 230 promulgations, attracting the term “major policy decisions” as outlined above.

“You may also appreciate that being a massive transaction, PIA and its affiliated assets e.g. Roosevelt Hotel, whose restructuring and expansion is being planned, do not fall in the fabric of Bilateral or Multilateral agreements with friendly countries or multilateral development banks (MDBs),” the ECP letter states.

“These important policy-centric tasks need to be explored and implemented by an elected government. The ECP must organize and conduct the elections and make such arrangements as are necessary to ensure that the election is conducted honestly, justly, fairly, and by law and that corrupt practices are guarded against under Article 218(3) of the Constitution of the Islamic Republic of Pakistan.

“With the above background and given the impending elections, you are requested to review the policy through the good offices of the Prime Minister/ Federal Cabinet for the privatization of major assets such as PIA and others and to keep it pending for the new to-be-elected government by the General Elections 2024.”

This scribe contacted the Caretaker Minister for Privatization Fawad H Fawad and inquired about the reasons for delaying outsourcing of airports up to March 15, 2024. He replied: “Airport outsourcing is being dealt by Aviation Division directly. Neither I nor anyone else in the Privatisation Division has anything to do with it.”

Meanwhile, Fawad Hasan Fawad chaired a meeting of the Privatisation Commission with Earnest & Young, the Financial Adviser for divestment of PIACL. The financial adviser presented a business plan forecasting the investment roadmap of PIACL. The adviser suggested immediate funding requirements of the airline. The proposed plan covered the capital and fleet requirements of the airline in the short and medium term to make it a viable and globally competitive airline. The minister advised further rationalization of the projections before submission of the plan for approval of the federal cabinet.

The legal segregation plan and transaction structure, together with the business plan and valuation methodology, shall be taken to the federal cabinet for final approval.