MoF proposes winding up of BESOS

Ministry of Finance has proposed winding up of Benazir Employees Stock Option Scheme (BESOS) launched in 2009 by the PPP government and taking control of Rs 28 billion lying in Employees Empowerment Trusts (EETs), sources close to Finance Minister told Business Recorder. The federal cabinet, on the directives of the then President of Pakistan, in its meeting held on August 5,2009 approved Benazir Employees Stock Option Scheme (BESOS), offering 12 per cent of GoP shares to the employees of 80 State Owned Entities (SoEs) as an arrangement to empower the employees.
The scheme envisaged 12 per cent of GoP share of the amount received from dividends was to be divided into two portions, 50 per cent to be credited to Central Revolving Fund (CRF) maintained by Privatisation Commission, which was to be used for payments of buyback claims on a pre-defined criteria and 50 per cent was kept by the Employees Empowerment Trusts (EETs) for distribution amongst the employees of respective entities. The sources said, to implement the scheme, EETs were created and registered in 64 SoEs and unit certificates were distributed amongst 236,306 employees in 59 SoEs. However, in spirit, the scheme could become effective for over 23 SoEs only.
The cumulative claims as on June 30, 2017 are estimated to be over Rs 32 billion as worked out by Privatisation Commission, giving an annual average payment of Rs 4 billion. In addition to this, out of total dividends received in CRF, 94 per cent was received from Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL) and Kot Addu Power Company Limited (Kapco) only, which is not sufficient to cater for its respective buyback claims. However, Rs 6.76 billion was available in CRF by June 30, 2016, of which Rs 1.16 billion was used for buy back related payments.
According to sources, Privatisation Commission placed moratorium on execution of the scheme from October 11, 2012. On the request of Finance Division, remaining amount of Rs 5.6 billion was remitted to the Finance Division on June 28, 2016. Finance Division stated at that time that the amount may be returned to Federal Consolidated Fund (FCF) account No.1, and be made available if need arsis.
On January 1, 2018, a Divisional Bench of Sindh High Court, Karachi on a case filed by employees, held that "a great loss to the public exchequer has been caused by creation of the BESOS trust and the public money has been in-fluxed in the trust in order to give benefits to the employees of SoEs". Finance Division further argued that apparently the Council of Common Interests (CCI) has not accorded any permission for creation of such trust under the law.
On one of the petitions filed by 300 employees of OGDCL, the Islamabad High Court (IHC) directed on April 29, 2016 that "Ministry of Finance while considering the implementation of the scheme shall take into consideration the legal rights which have already accrued in favour of the petitioners". The Supreme Court of Pakistan while taking up the matter on January 10, 2018 took into consideration of the judgment of January 3, 2018 on the request filed by the Privatisation Commission of the Sindh High Court and allowed Privatisation Commission leave to appeal.
According to Finance Division, a substantial funding from national exchequer is required to keep it afloat. If only buy-back benefits to the claimants belonging to Kapco, OGDCL and PPL are entertained, it will result in massive financial outlay, which may continue for a long time.
The sources said Ministry of Privatisation has endorsed the proposal, whereas Ministry of Law and Justice has not rendered an opinion but stated that the Finance Division may pursue the case pending adjudication before Supreme Court for settlement of the issue.
Finance Division, sources said, argues that the final decision of the case by the courts may take sometime, meanwhile an amount of Rs 28 billion lying stuck in EETs including Rs 117.601 million with Privatisation Commission may be returned to Federal Consolidated Fund Account No 1 being the Federal Government's share of dividends; secondly, no amount may be transferred to any bank account henceforth on account of BESOS and thirdly, Privatisation Commission may initiate the case for winding up of BESOS. The matter has been referred to the federal government because BESOS was created by the cabinet.