The government on Wednesday could not take a decision to delist two companies from the active privatisation list, as its focus turns towards selling precious land rather than doing meaningful privatisation to stem growing public sector losses.
The Cabinet Committee on Privatisation (CCOP) set up two committees to decide on delisting the blue-chip Mari Petroleum Company Limited (MPCL) and controversial Pakistan Engineering Company (PECO). Finance Minister Shaukat Tarin chaired the CCOP meeting.
However, the CCOP approved the minimum sale price of Rs1.94 billion for selling Services International Hotel, which is more of a real estate transaction.
Similarly, the CCOP spent significant time on the matter of selling a high-value plot of PECO instead of privatising the whole company, an official of the Privatisation Commission told The Express Tribune after the meeting.
Many parties, including some from Karachi, want to acquire the Badami Bagh property of PECO, said the official. The meeting discussed the proposal of divestment of government’s shares and directed the Privatisation Commission and Ministry of Petroleum to further examine the issue in light of the discussion and come up with comprehensive proposals during the next CCOP meeting, according to a Ministry of Finance statement.
The Petroleum Division had proposed to drop MPCL from the privatisation list and shelve the plan to divest the remaining 18.39% government stake in the company.
Under the 1985 agreement, the Fauji Foundation had held 40% stake, 20% by Oil and Gas Development Company (OGDC) and 40% by the federal government. Subsequently, the government sold 21.61% shares to the general public.
The Fauji Foundation has the management rights and operational responsibility to run the company. If the government divests all of its shares in MPCL, it will lose dividends of ordinary shares and it will also forego future dividends and capital gains, according to the Petroleum Division. The Fauji Foundation had concerns about losing management control in the process of MPCL privatisation. There was also an issue of removal of cap on dividend payments by MPCL, which had been removed by the Pakistan Tehreek-e-Insaf (PTI) government.
In April this year, the Petroleum Division conveyed to the Privatisation Commission that the government should retain the remaining 18.39% stake in the company and delist the entity from the privatisation list “in the greater national economic and general public interest”.
The CCOP was informed that in the last fiscal year the company contributed Rs78.3 billion to the government exchequer, which was higher from the preceding year. The cabinet body was also informed that its block 28 has a geographical structure that may lead to significant discoveries in the near future.
The Petroleum Division argued that MPCL was not a public sector company under the Partnership and Shareholders Agreement and thus did not qualify for privatisation.
The CCOP examined the proposal for removal of the PECO from the active privatisation list and directed constitution of a committee consisting of representatives of Privatization Commission, Law Division, Establishment Division, Industries and Production Division, Finance Division and the Securities and Exchange Commission of Pakistan (SECP) to thoroughly analyse the case and come up with its proposals on issues highlighted in the meeting, according to the finance ministry statement.
The Privatisation Commission had made a contradictory proposal to the CCOP. It, on one hand, requested the CCOP to remove PECO from the privatisation list but, on the other hand, requested to allow the Privatisation Commission to sell its multibillion rupees plot, according to the documents.
In August 2019, the government had picked PECO for privatisation and decided to divest its 33.24% equity shares in the entity. The Faysal Bank led consortium had emerged as the top ranked party for the privatisation transaction but its hiring process was deferred.
In May last year, the Ministry of Industry had been assigned to give a timeline for sale of shares by the NIT, the board of directors’ approvals of five government entities to sell the 33.24% PECO stakes, decision on the government’s liabilities of Rs7.2 billion and sale of Badami Bagh Lahore, to settle the liabilities.
There were also hosts of other issues that require resolution like court cases, default on NBP loans, defaulter status at the stock exchange and mutation of land in the name of the PECO. The managing director of PECO had also entered into an unauthorised joint venture with a private party.
The sources said that the main issue of the plot owned by PECO, which the government was keen to sell despite land mutation issues and without deciding the fate of the company. The PTI’s privatisation policy has remained confused and its only success story is selling few real estate properties, which were not even worth of Rs1 billion.
The CCOP also discussed the proposal for privatisation of Services International Hotel and after thorough debate approved the revised reserve price subject to further approval by the federal cabinet, according to the finance ministry.
On recommendation of the privatisation ministry, the CCOP approved Rs1.94 billion reserve price. In March this year, the PC board had approved a minimum sale price of Rs2.25 billion for Services International Hotel.
“Due to downward revision in the height of high rise tower from 310 Feet to 245 feet by the Civil Aviation Authority, the base price has also been adjusted from Rs2.25 billion to Rs1.94 billion,” said Samreen Zahra, spokesperson of the privatisation ministry. She added that the PC board had endorsed both the prices.
Six potential investors had earlier been pre-qualified for the bidding stage and the government wanted to sell the hotel in March but could not complete the transaction.
Published in The Express Tribune, June 24th, 2021.
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