ISLAMABAD: The government on Thursday approved to sell 26% or more shares of 31 state-owned entities including Pakistan International Airlines (PIA) and Pakistan Steel Mills (PSM) – to fulfill a key condition of the International Monetary Fund’s (IMF) $6.7 billion bailout programme.
The list was approved by Cabinet Committee on Privatisation (CCOP), three days after expiry of September 30 deadline set by the IMF for giving a detailed plan for these entities aimed at turning around the loss making firms and reducing the government’s footprints.
Privatisation Commission had tabled a list of 30 items but the CCOP – headed by Finance Minister Ishaq Dar – added Lakhra Power Plant at the eleventh hour. Lakhra’s privatisation would be subject to approval by the Council of Common Interest (CCI), as the plant was not among the 65 entities that the CCI had earlier approved for privatisation and restructuring.
Last month, the Supreme Court of Pakistan had struck down the Lakhra Power Plant’s 20 years’ lease to M/s Associated Group after finding faults in the lease agreement. The apex court had declared the lease as illegal and void and directed the federal government to conduct an inquiry to fix civil and criminal liabilities on beneficiaries in accordance with law.
Among the approved 31 entities are the PIA, the PSM, Pakistan State Oil, Islamabad Electricity Supply Company and Gujrawanala Electricity Supply Company. The government has already announced to sell 26% stakes of the PIA to a strategic partner but the inclusion of the PSM was a surprising one.
Earlier, the government had announced to restructure the loss making entity instead of privatising it after the main opposition party in the National Assembly threatened to launch a country wide strike.
According to a Finance Ministry official, it was not necessary that the government will privatise all the 31 enterprises. He said the approval was given in bundle and after Eid the Privatisation Commission will bring a list of half a dozen among 31 entities that could be privatised on fast track basis. However, the PIA will be among half a dozen entities that have to be privatised by December 2014 as part of the IMF condition.
“The future of the employees and political backlash against the privatisation will be key determinants for reaching a decision of full or partial privatisation,” the official said.
The CCOP directed the Privatisation Commission to ensure that the interests of employees were to be protected at all cost, according to a handout of the Ministry of Finance.
He said it was also not necessary that the government would sell only 26% shares. There was possibility that on case to case basis the government might sell majority shares to the private parties if the strategic partners refused to take management with minority shares.
A federal minister, who attended the meeting, also showed apprehension that the strategic partners might not like to take management control with minority shares.
“However, in case the bidder seeks majority shares, the entity will again be brought in front of the CCOP for fresh approval,” he added. The CCOP approved four-pronged plan for these entities that revolved around off loading shares in the stock market, handing over management control to the private sector, divestment and selling assets where necessary.
The government will offload shares of Oil and Gas Development Company Limited, Pakistan Petroleum Limited, Pakistan State Oil, Habib Bank Limited and Untied Bank Limited, as these entities were already registered in the stock markets.
The CCOP may decide either to handover management control of National Insurance Company Limited or issue Initial Public Offering (IPO) at stock market. Islamabad Electricity Supply Company and Gujrawanala Electricity Supply Company would be offered for strategic partnerships.
“Despite approval for privatisation, there is a possibility that the PSM will be restructured given the opposition to its privatisation,” the officials said.