ISLAMABAD: The Auditor General of Pakistan (AGP) has recommended a significant overhaul of the process by which the Privatisation Commission selects buyers for the privatisation of state-owned enterprises (SOEs).
In a meeting of the Public Accounts Committee’s sub-committee, the audit officials have called for a revision of pre-qualification rules, arguing that the technical competence of a bidder should carry more weight than the immediate financial offer, and lessons should be learnt from previous transactions.
Shahida Begum convened the meeting. The committee examined the Audit Report of the Ministry of Privatisation for the fiscal years 2010-11 and 2013-14. Hammad Shamimi, Secretary, Privatisation Division, responded to the audit objections.
READ MORE: SOEs: PM terms PIA privatisation ‘major milestone’
The official of the Federal Public Procurement Regulatory Authority (PPRA) also endorsed the viewpoint of AGP and said that the technical competence of a bidder should be given more weightage than financial valuation.
The committee asked the Privatisation Commission to review the Privatisation (Modes and Procedure) Rules 2001, which it thought needed more clarity during execution.
The audit reports pointed out procedural loopholes in the past privatisation of Kot Addu Power Company (Kapco), Javedan Cement Limited, Mustehkum Cement, Faletti’s Hotel, and Pak American Fertilizer Limited.
Audit found the absence of a pre-qualification process in the Privatisation of Javedan Cement Limited. It was observed that the EOIs for the acquisition of 96.34 percent shares were involved on July 28, 2005, with the closing date of August 6, 2005. 43 EOIs from the prospective investors were received by the commission. Only 4 investors deposited earnest money of Rs 75 million up to the due date and stood qualified for the bidding.
The Audit is of the view that the prequalification of bidders was not made keeping in view the financial, operational, and technical aspects. However, only submission of earnest money was the pre-qualification criterion, which was not in accordance with the cited rules and procedures. The committee was apprised that the land of the Javedan Cement Limited had been converted into a private housing society.
In a similar case, an audit observed during the scrutiny of the record of the Privatisation of Mustehkum Cement Limited that expressions of interest for the acquisition of 85.29 percent shares were invited on April 2, 2005, and re-advertised on June 17, 2005. The last date for submission of EOIs was June 25, 2005. Thirty-eight (38) EOIs from the prospective investors were received by the commission. Bidders were directed to deposit earnest money of Rs 75 million. Only three investors deposited the earnest money on the due date and stood qualified for bidding.
Secretary, Privatisation Division, said that the privatisation of these entities was carried out following the laid down rules and after the approval of competent forms- PC Board and Cabinet Committee on Privatisation. He further said that the past transaction had fetched market-based revenue for the government.
Another audit para relates to the whereabouts not known to the audit of USD11 million in the Kapco privatisation case.
According to audit officials, the Kapco had to reconcile the difference between the actual and estimated level of spare parts, fuel, and diesel oil, etc., within 30 days of closing, being their sole responsibility, and a complete report was to be submitted to Wapda for verification. Under the Escrow agreement, USD12 million was retained in the Escrow account against stores, spares, and fuel stocks. A joint study for the reconciliation of spare parts was conducted by the Kapco and Wapda, and it concluded that the spare parts were approximately $11 million in excess of $12 million retained in the Escrow account.
Secretary, Privatisation Division, replied that no claim was submitted by Kapco administration or Wapda as both sides reconciled the difference in definition. However, he said that the commission had no record as the transaction was completed in May 1997, when the Privatisation Commission was not constituted.
He said before the year 2000, the privatisation was held by the Finance Division, and they held the record, but an official of the Finance Division said that all the record was transferred to the Privatisation Division.
The Convener Committee expressed hope that the privatisation of the recent PIA may bring good results for the public.
Copyright Business Recorder, 2026
Comments
Comments are closed for this article.