30 steps needed for PIA privatisation

ISLAMABAD: Despite making commitments with newly-elected Prime Minister Shehbaz Sharif for completion of privatisation process of PIA, there are 30 steps that are needed to be undertaken to accomplish one of the most complicated transactions ever done by the Privatization Commission since its inception.

If all these 30 steps are accomplished in a speedy manner, the privatisation process requires at least six months to one-year period to complete, top official sources confirmed to The News on Sunday.

To explain just one step, the official sources said the government would have to secure No-Objection Certificate (NOC) from approximately 35 lenders, who have provided loans to the cash-bleeding PIA for keeping its operation afloat. How much time the NOC would take from each individual lender is impossible to guess but it would not be possible to accomplish the privatisation till end of June 2024.

Citing an example, official sources said there was small privatisation of Heavy Electrical Complex (HEC), as its SPA (Sale Purchase Agreement) was accomplished in 2022, but the procedural requirements took almost two years and it was handed over to the new buyer and investor in 2024. “Now PIA’s privatisation is the most complex transaction and if it is completed in one year, it should be considered an achievement,” said the official sources.

Sources said the last caretaker minister for privatisation had also claimed that he had undertaken spadework for privatisation of PIA. The same was committed when the newly-elected PM Shehbaz Sharif had taken over the charge and it was conveyed to him that the transaction would be completed till June 2024.

“This is a simply a bluff,” said the sources and added that the top military brass was conveyed in writing that the sale of PIA could not be done in such a hasty manner. The relevant quarters have conveyed to the military establishment that PIA privatisation requires at least six months to one year to accomplish the task smoothly.

Official sources said PIA would have to move towards bifurcation in two entities and it requires four to five steps for reaching that stage. For instance, securing an NOC from lenders may take several months, added the official.

There is another risk that the IMF might raise objections over unbundling of PIA because settlement of Rs260 billion would have a cost of Rs32 billion on a per annum basis and there might be Rs16 billion cost attached to restructuring of domestic debt. The IMF has not granted its assent to the settlement of PIA’s domestic loans, keeping in view its attached fiscal cost.

The IMF asks for tackling the underlying structural problems such as improving energy mix, curtailing leakages and improving collection of bills as well as rationalizing tariff in line with recovering the cost of energy in order to make this sector sustainable.

However, sources close to the last caretaker government claimed that everything with regard to the PIA privatisation is complete and only formal steps are needed to be taken.