Privatisation strategy: Planning minister has a different take

Minister for Planning, Development and Reforms, Ahsan Iqbal has rejected privatisation plan of his own government, suggesting that privatisation was required to be strategically reviewed so that only loss-making State Owned Enterprises (SOEs) could be privatised; well informed sources told Business Recorder.
Ahsan Iqbal's comments came at a recent meeting of Economic Co-ordination Committee (ECC) of the Cabinet when the issue of Pakistan Machine Tool Factory (PMTF) came under discussion. The government is actively pursuing privatisation of two power Distribution Companies (Discos) ie Islamabad Electric Supply Company (Lesco) and Faisalabad Electric Supply Company (Fesco).
Giving the background, sources said while considering a summary of Ministry of Industries and Production(MoI&P) proposing bailout package of Rs 1.477 billion for the rehabilitation of Pakistan Machine Tool Factory (PMTF), the ECC had directed the Privatisation Division to bring a summary to the ECC, after due consultation with the stakeholders. In the meanwhile, on March 19, 2015, the ECC upon the recommendations of the Privatisation Division approved Rs 96 million for paying three months' salaries to the staff of the PMTF for January, February and March 2015.
Privatisation Division, on the request of PMTF, proposed a bailout package of Rs 1.381 billion for the rehabilitation of PMTF. The package will include working capital of Rs 558 million and personnel related costs amounting to Rs 823 million.
It was revealed that PMTF had an approximate loss of Rs 2.262 billion as of June 30, 2014 with total approximate liabilities of Rs 3.657 billion which further increased to approximately Rs 3.794 billion as on April 1, 2015. The profit and loss accounts statement of PMTF made it evident that the enterprise had not been able to utilise its resources appropriately, hence, gradually turned into a loss making entity.
The meeting was informed that Pakistan Ordnance Factory (POF) had shown an interest in acquiring PMTF for which POF had completed PMTF's technical due diligence and its tax and financial due diligence was in process.
Privatisation Division argued that extending the proposed bailout package of Rs 1.381 billion to PMTF at this stage was not advisable keeping its financial performance for the last many years and the impending early privatisation in mind.
Moreover, due to dire financial constraints, PMTF had not been able to pay dues to its 508 retired employees since 2008 including 37 retired employees who have expired. Under its current financial condition, it is not possible for the company to pay even its existing employees' salaries.
Privatisation Division requested the ECC to approve an amount of Rs 823 million for the payment of PMTF's retired employees' dues, on humanitarian grounds and another amount of Rs 96 million for the payment of PMTF's existing employees' salaries for the period from April1, 2015 to June 30, 2015. Additionally, MoI&P may be directed to ensure that the funds extended to PMTF are strictly utilised for paying off employees' related dues only.
Finance Minister who is also the Chairman of the ECC advised the completion of due diligence and to accelerate the process of privatisation of the enterprise and suggested that the POF might also consider the inclusion of the post retirement liabilities of the PMTF's employees in the overall cost of the transaction. Minister for Planning, Development and Reforms Ahsan Iqbal suggested that the list of State-Owned Enterprises (SOEs) proposed for privatisation be strategically reviewed so that only SOEs making losses be privatised.
Commenting on Planning Minister's proposal, the Finance Minister said that this will be discussed in detail by the Cabinet Committee on Privatisation (CCoP).