The Privatisation Division has envisaged privatising two newly established RLNG-based power plants, SME Bank and First Women Bank, besides preparing revival plans for Pakistan Steel Mills (PSM) and Power Distribution Companies in financial year 2019-20.
Secretary Privatisation Division Rizwan Malik gave a comprehensive briefing on privatisation plan of the government to the National Assembly's Standing Committee on Privatisation on Thursday. Syed Mustafa Mahmud chaired the meeting of the committee.
The secretary informed the members of the committee that the division would take a proposal of appointment of financial advisor (FA) for revival plan of loss-making PSM in the upcoming meeting of Cabinet Committee on Privatisation (CCoP) for approval. He said the expert group constituted under the advisor on commerce had decided to revive the PSM and entrusted Privatisation Division with the responsibility to prepare draft of revival plan. "We will complete the process of hiring of FA for financial structure of PSM in three to four months required under PPRA Rules after getting approval from the CCoP," he added.
He further said that two international investors from Russia and China, who also participated in the last bidding process of the PSM privatisation, still have interest in the PSM.
"Because it is a revival plan, therefore, it has not been put on the active privatisation list of the Privatisation Division," he replied to a question raised by a member of the committee.
He further revealed to the committee that the Division also received recommendations prepared for the revival of DISCOs by Prime Minister's Energy Task Force headed by Nadeem Babar. "We are looking into the matter related to privatisation and if members of the parliamentary committee want, he would share main features of the recommendations in the next meeting," he said.
The chairman committee directed the Energy Task Force and energy expert from independent power producers to brief the committee on revival plan of DISCOs recommended by the task force and privatisation of two RLNG-based power plants.
The committee was upset on the privatisation of two RLNG-based power plants as a short-term measures to build an estimated $ 2 billion as foreign exchange reserves. The chairman committee observed that local investors should be given preference over international buyers in long-term. He observed that guaranteed power purchase agreement provides investment protection to the potential buyers, which needs to be reviewed.
The secretary said that in a couple of days, the Division will sign Financial Advisory Services Agreement (FASA) with FA-M/s Credit Suisse. The FA will present its report to the Division by end of June after due diligence. "We have plans to invite international bidders for the privatisation of National Power Parks Management Company (Pvt) Limited (NPPMCL) by September or October," he added.
He said a steering committee was also constituted which held two meetings. The steering committee comprising representatives of all relevant departments is looking into the pending problems or issues in privatisation of RLNG-based power plants.
The committee was further informed that State Bank of Pakistan and Ministry of Finance are pushing the Division to find out a suitable strategic partner from private sector to run the SME Bank and First Women Bank as both are running into losses. The agreement with the FA for the privatisation of SME will be held in a couple of days, the committee was informed.
Challenging the government's decision of fast track privatisation of the two SME banks, most of the parliamentarians said they should be revived through 'Sarmaya Pakistan Fund' as the government will not get any earning from the privatisation proceeds. "These two banks will help and support the CEO of Sarmaya Pakistan Fund in getting investment and their revival is comparatively easy than PSM and Pakistan International Airlines (PIA)," the chairman committee said.
Minister for Privatisation, Muhammad Mian Soomro said the SME Bank should be revived but the government has no fiscal space. Private sector can inject capital into the bank, he said.
Additional Secretary Ministry of Finance Sohail also endorsed the viewpoint of Privatisation Division. He said that the government has already studied all the options and it was not suitable for the government to inject capital in global scenario of SME sector. He said the government has planned to initiate a joint venture with the World Bank of Rs 11 billion in the same sector. He further said that all the 32 branches of commercial banks are offering services to the SME sector.
The committee was informed that the bank went into losses after it was put on the privatisation list. Responding to a question regarding failure to privatise the bank so far, the senior consultant Privatisation Division said that four investors showed their interest in the privatisation of SME Bank in early 2018 with a restriction to invest Rs 6 billion in the bank; however, all withdrew their offers after State Bank of Pakistan put Rs 10 billion paid-up capital restriction.
The secretary privatisation assured the management of First Women Bank that the soft image of the bank will remain the same through its charter given in the guidelines provided by a high court in a decision in 1998. The employees of the bank would be provided protection and the FA will be selected for the bidding process of the SME Bank.