The government, on Thursday, announced it would retain Ernst & Young (E&Y) advisory firm for a second attempt at selling Pakistan International Airlines (PIA)just two months after Privatisation Minister Abdul Aleem Khan publicly criticised the company for its poor handling of the first privatisation bid.
In a briefing to the National Assembly Standing Committee on Privatisation, Secretary Privatisation Usman Bajwa disclosed that the government had decided to re-engage E&Y. He further said that a new advertisement would soon be given to invite parties for participation in the privatisation process.
The secretary's statement marks a departure from an earlier statement given by the privatisation minister in November 2024 during a meeting of the Senate Standing Committee on Privatisation.
The privatisation minister had disapproved of the work of PIA's financial adviser, E&Y, and said that "its cooperation and feedback were below expectations." The government had hired the consultant at a cost of nearly Rs2 billion, and only 27% of the price was to be paid after bidding, the privatisation secretary said in November.
On Thursday, Bajwa did not clarify the change of heart on part of the government, which only two months ago expressed dissatisfaction with the financial advisor's performance. In October last year, the government attempted to sell PIA to a single biddera real estate developerwho offered Rs10 billion against the minimum reserve price of Rs85.03 billion, but failed. No foreign company came forward as the lead consortium to acquire PIA.
The Muttahida Qaumi Movement (MQM)'s Muhammad Farooq Sattar chaired the standing committee meeting to seek an update on the ongoing privatisation transactions, including that of the Roosevelt Hotel in New York.
The secretary privatisation commission further said that PIA's privatisation prospects have enhanced after the opening of European routes. He confirmed The Express Tribune's story that the International Monetary Fund (IMF) has also given the go-ahead to waive taxes on aircraft leases and park Rs45 billion more in the holding companyincreasing the airline's market value for this round of bidding.
To capitalise on these developments, the government plans to issue a fresh expression of interest, said Bajwa.
Earlier, bidders had demanded an exemption from the 18% sales tax on the lease of aircrafts and writing off additional liabilities of Rs45 billion. Bajwa noted that two serious bidders walked away after the government rejected their demands.
He revealed that one bidder demanded full management control without purchasing shares, while another proposed laying off all permanent employees and rehiring on a contractual basis.
Pushback
Meanwhile, the standing committee did not approve some of the proposed legal amendments to the Privatisation Commission Ordinance. It also struck down a proposal granting authority to the prime minister to determine the number of Privatisation Commission board members. At present, this authority rests with the federal cabinet.
The proposal to empower the prime minister over the federal cabinet was against the principles of transparency and participatory democracy, said Khawaja Sheraz Mehmood.
The standing committee also contested another proposal which sought to give the prime minister authority to determine the remunerations of the chairman of the privatisation commission, secretary privatisation and board members. "The Parliament cannot give a free hand to any prime minister to determine remunerations on personal whims," said MNA Sehar Kamran.
However, the senior draftsman of the Ministry of Law, Jam Aslam, opined that since the authority to appoint board members and the chairman rests with the prime minister, the power to fix remunerations should also be given to the prime minister.
Roosevelt hotel
The privatisation secretary informed the committee that the financial advisory firm hired for the sale of the Roosevelt Hotel has presented three optionsoutright sale, joint venture, or giving the hotel on a 99-year lease. He said that under the proposed model, an outright sale will take three years, and the joint venture process will be completed in nine years.
The chairman of the committee opined that the government may opt for the outright sale to avoid any complications involved in undertaking a joint venture in the public sector.
House Building Finance Corporation
With regards to the selling of the House Building Finance Corporation (HBFC), the privatisation commission once again gave an unconfirmed deadline stating it could either be the end of this month or the first week of next month. This is one of many deadlines given in the past couple of years.
Bajwa said that the sole bidder for HBFC has presented its terms to acquire the corporation. These will now be presented before a cabinet body set up to negotiate with the bidder.
The members questioned the capabilities and the process being adopted by the privatisation commission, which, in the cases of PIA and HBFC, was only able to attract sole bidders. Bajwa, however, argued that, apart from the procedures, the country's economic conditions also play a key role in the success or failure of any privatisation transaction.
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