PIA’s privatization would continue, though it would require a fresh approach and ‘big-hearted’ decisions: Abdul Aleem Khan
Senate Standing Committee on Privatization meeting held under the chairmanship of Tallal Chaudhry
ISLAMABAD ( WEB NEWS )
Senate Standing Committee on Privatization, chaired by Muhammad Tallal Chaudhry, convened on Monday to review ongoing privatization efforts and address concerns regarding the future of Pakistan International Airlines (PIA) and state-owned distribution companies (Discos).
Federal Minister for Privatization, Abdul Aleem Khan, highlighted significant hurdles in the privatization process, with a focus on PIA’s ongoing struggles, the appointment of new consultants, and the privatization of Discos.
Minister Aleem Khan informed the committee that PIA’s privatization would continue, though it would require a fresh approach and “big-hearted” decisions. He revealed that the first consultant engaged for the task was deemed unsatisfactory, and a new consultant would be hired to help move the process forward. Abdul Aleem Khan emphasized that privatization could only take place if PIA’s financial and operational situation was “clean” and attractive to potential buyers.
While discussing the PIA’s Financial Challenges and Privatization Process the Minister briefed the committee on the financial woes of PIA, citing a staggering loss of PKR 830 billion, of which PKR 623 billion had been parked in the Holdco company to manage outstanding liabilities. He noted that despite efforts to stabilize PIA, it still faces challenges, including a loss of PKR 45 billion at the time of the privatization initiative’s launch on November 28, 2023. “We’ve parked PIA’s debt, but the privatization process must be conducted with transparency and a clear strategy,” Minister Abdul Aleem Khan remarked. He compared PIA’s situation to Air India, which had undergone multiple failed privatization attempts before ultimately succeeding on its fifth attempt. Abdul Aleem Khan expressed hope that Pakistan’s national airline could follow a similar path but underscored the need for thorough reforms.
The committee discussed the lack of interest from potential buyers, citing various factors including the high 18% GST on PIA services, which has deterred investors. The minister also criticized the Federal Board of Revenue (FBR) for imposing taxes on new aircraft purchases, a move he argued was inconsistent with global practices and a barrier to PIA’s recovery. “We need to ensure that PIA is clean and profitable before privatization can proceed. Without addressing these fundamental issues, investors will not show interest,” Abdul Aleem Khan said.
In addition to PIA, the committee also discussed the privatization of state-owned electricity distribution companies (Discos). Abdul Aleem Khan noted that the privatization process for the first three Discos was expected to be completed by January 31, 2025. However, he acknowledged that privatizing Discos would be even more challenging than PIA, citing nine key issues that needed to be addressed before moving forward.
The committee heard that the government was planning to hire a financial advisor by the end of November to assist with the Discos privatization. The first batch of Discos, which are considered profitable, will be prioritized, though the consultant has suggested either selling them together as a package or individually. The committee decided to summon the Federal Investigation Agency (FIA) to investigate the alleged corruption involving Muhammad Tahseen Alvi, Chairman of the Board of Directors of Faisalabad Electric Supply Company (FESCO). The committee will address the matter in its next meeting, with the FIA expected to provide a detailed briefing on the case.
During the meeting, committee members expressed concern over the slow pace of privatization and the lack of investor confidence in both PIA and Discos. Senator Khalida Ateeb emphasized the importance of improving the operational efficiency of these state-owned enterprises to attract buyers. She stated, “Investors will only be interested in buying if we improve the state of these institutions.”
The committee members also questioned whether the government’s handling of agreements with Independent Power Producers (IPPs) had influenced investor interest in PIA and other state assets. In response, the Privatization Commission’s secretary clarified that only one IPP was government-owned, and that it had not been involved in the discussions.
Looking ahead, Minister Khan expressed optimism about the prospects of PIA’s privatization once these issues are resolved. He concluded, “We will fix what has been damaged and work with a new consultant to ensure PIA is ready for privatization.”
The committee confirmed that the World Bank would present a report on the privatization process within the next 15 days. Additionally, the FIA is expected to provide an update on the FESCO chairman’s case in the forthcoming meeting.
The privatization of both PIA and the Discos remains a key government priority, but significant challenges remain as officials work to resolve financial, regulatory, and operational issues before moving forward with the sale of these state assets.