Govt working on private sharing in MPCL, SME Bank, PSM: NA told

Islamabad: The Finance Ministry has informed the National Assembly that the government is currently working on three transactions including Mari Petroleum Company Limited (MPCL), SME Bank and Pakistan Steel Mills for divestment and accomplishing finding out strategic partner during the current fiscal year.

In its Fiscal Policy Statement for 2017-18 submitted by Finance Ministry into the National Assembly stating that the government was currently working on three transactions for 2017-18 that include MPCL, SME Bank and Pakistan Steel Mills.

The Privatization Commission is in the process of finalising the appointment of financial advisers for the divestment of up to 18 percent of shares in MPCL to domestic and international investors through the Pakistan Stock Exchange.

Pre-qualification of interested parties for the strategic sale of government=s 94 percent shareholding of SME Bank Ltd is being finalised. The reform strategy being followed in case of the three major PSEs B Pakistan Railways, Pakistan International Airlines and Pakistan Steel Mills.

Pakistan Steel Mills (PSM): A comprehensive restructuring plan has been implemented for Pakistan Steel Mills to prepare for potential strategic private sector participation in the company. Financial advisers were hired in April 2015 and due diligence was completed in August 2015.

The process to attract strategic private sector participation has been restarted in the absence of an agreement with the government of Sindh, which was earlier offered transfer of PSM=s ownership. The transaction structure for Strategic Sale of Pakistan Steel Mills has been approved by the Privatisation Commission Board. A liability settlement plan in consultation with NBP, SSGC, PSMC and Ministry of Industries and Production is being finalised.

Pakistan Railways (PR): Railway Revitalization Strategy is being implemented, which envisages improvements in business processes and the institutional framework, financial stability and service delivery. As a result, PR has been making progress since 2013-14 as reflected in its operational and annual financial data. Revenues in 2014-15 and 2015-16 have improved by 45 percent and 15 percent, respectively. This was possible through rationalisation of tariffs, expenditure controls, and improved occupancy rates. Revenues further increased by 10 percent for 2016-17 (Rs40.1 billion from Rs36.5 billion in 2015-16).

Renovation of old locomotives and procurement of approximately 350 new locomotives over the past four years has allowed PR to significantly expand its freight operations. The operation of freight trains from Karachi to up-country has been increased by 13 percent from 2,920 in 2014-15 to 3,309 in 2016-17. This has been achieved whilst efficiency savings in staffing have reduced Pakistan Railways= headcount from approximately 95000 as of 30 June 2013 to 70000 as of 30 June 2017.

Appointment of the Railway Board was completed in February 2015 and company=s financial accounting practices are being strengthened, including moving from a cash to accrual basis accounting (IFRS), automation and reconciliation of land assets database, transition from conventional audit procedures to risk based audit methodology, notifying an appropriate public private partnership (PPP) framework and focusing on improving the transparency and efficiency of the procurement process through implementation of Enterprises Resource Planning.

Pakistan International Airlines (PIAC): The present government has strategised to convert PIAC into a company under Companies Ordinance 1984 in order to improve corporate governance that can help in attracting strategic private sector partnership in the core airline operations, and move PIA under a more efficient and up to date legal framework. A new CEO has been appointed and a new business plan is under development focusing on separation of PIA’s core and noncore activities. The PIA management is working to further limit financial losses by: (i) increasing performance by route rationalisation and fleet modernisation and expansion, (ii) reducing financial and operational costs, and (iii) providing better services to gain customers’ confidence.

A business plan for PIA has been developed, which envisages the introduction of fuel efficient aircrafts, route rationalisation, existing product improvements, focus on separation of core and non-core activities, formulation of a comprehensive governance plan and human resource rationalisation with the objective of making PIA sustainable and profitable entity in the long run.

The fiscal statement says that cornerstone of the business plan is a shift in strategy from high capacity, low frequency operations to high frequency optimum capacity operations. Execution of business plan will help to improve its revenues and reduce losses. The restructuring plan will be followed by divestment of 26 percent GOP equity stakes to strategic partner with management control.