Sell-off business relegated to back burner

There is no Chairman of the Privatisation Commission (PC), the position fell vacant on 29 January when Mohammad Zubair was made Governor Sindh and there is no Secretary Privatisation Commission since 24 March. This indicates that privatisation is now on the back burner till elections next year, informed sources told Business Recorder However, an additional charge of Secretary PC has been given to the Shahid Mehmood.
Entities which are hemorrhaging the economy notably Pakistan Steel Mills (PSM), Pakistan International Airlines (PIA) and power sector entities continue to be as much of a burden on the exchequer as during the previous administration. This is a digression from the PML-N manifesto 2013 which states that "several key state owned enterprises like PIA, Railways, PSM, WAPDA and others institutions are a major drag on Pakistan''s economy. Therefore, reforming these SOEs through a combination of privatisation and restructuring is fundamental".
Only profitable entities have so far been privatised during the current tenure of the Sharif administration through offering government shares in the capital market. An official of the PC on condition of anonymity stated that at present there appears to be no focus of the government towards privatisation or restructuring.
The government had sold 20 per cent shares of the United Bank Limited (UBL) at Rs 38.2 billion, 5 percent shares of the Pakistan Petroleum Limited (PPL) at Rs 15.34billion, 11.46 percent shares of the Allied Bank Limited (ABL) at Rs 14.44billion, 41.5percent shares of the Habib Bank Limited (HBL) at Rs 102.34 billion and 88percent shares of the National Power Construction Corporation (NPCC) at Rs 2.5billion.
In April 2016, the Minister for Water and Power stated during a meeting that he had been instructed by the Prime Minister to stay privatising of Discos, which was in contravention of the commitment made by Finance Minister Ishaq Dar to the International Monetary Fund (IMF) under the three-year 6.64 billion dollar Extended Fund Facility (EFF).
The government, under the EFF, committed to the IMF to reform 30 public sector enterprises (PSEs) and laid out a time bound strategy for privatising 65 PSEs including formulating a medium-term action plan to restructure PIA, PSM, and Pakistan Railways.
The commitment included privatisation of 26 percent of PIA shares to strategic investors by end-June 2014 as well as hiring a professional audit firm to conduct a technical and financial audit to identify the stock and flow of payables at all levels of the energy sector (including Power Sector Holding Company Limited) by end-November 2013.
In the first review of the EFF, new structural benchmark on privatisation was agreed envisaging hiring of three financial advisors for three PSEs in the capital market transactions list and three financial advisors for three PSEs in the strategic private sector enterprises list earmarked for privatisation.
In the second quarterly review, the government stated that it had identified eleven companies in the oil and gas, banking as well as in insurance and power sectors for block sales, and primary or secondary public offerings and committed to hiring three financial advisors by end-March 2014 to offer minority shares in three companies in domestic or international markets by end-June 2014 subject to investor interest and global market conditions. Furthermore, it said it will hire financial advisors for at least two other companies by end-June 2014 to market minority shares within six months thereafter.
The government also committed to hiring financial advisors for one electricity distribution company and one power generation company and again promised to restructure/privatize PIA, PSM and Pakistan Railways.
Staff level report on third review pointed out that advisers were hired for only three firms rather than six. The government agreed on a new benchmark to push forward the privatisation process with completed share offers for two firms by end-June 2014 for offering minority shares in United Bank Limited and Pakistan Petroleum Limited.
Staff level report of the IMF on fourth and fifth review noted that SBP missed the NIR reserves by end September 2014 due to delay in privatisation. The government completed minority share sales of UBL and PPL in June 2014 raising over $500 million in revenue. The authorities had intended to sell additional shares in OGDCL, but postponed the offer in light of adverse world energy market developments. The hiring of financial advisors for PIA, Faisalabad Electric Supply Company (FESCO) and Northern Power Generation Company Limited (NPGCL) was completed in July 2014. The hiring of financial advisors for ABL and HBL was finalised in November.
The IMF in the seventh review referred to the government performance on privatisation as a key issue and again in the eighth review stated that "an accelerated pace of privatisation and restructuring of public enterprises as well as regulatory reform will also go a long way toward improving the business climate and supporting private sector-led activity".
The IMF in the final review report noted that the cumulative losses of PIA, PSM and Pakistan Railways have increased, but at a slower pace. The report noted that there were some successful capital market transactions. The government has succeeded in public offering of the shares of only five profit making entities and the losses incurred by three major public sector entities (PSEs) - PIA, PSM and Pakistan Railways - surged to about Rs 705 billion in the first three years of the present government.