OPPOSITION SLAMS GOVERNMENT’S PRIVATISATION POLICY
Naveed Butt | Ali Hussain 21 Jul 2020
ISLAMABAD: The opposition in the National Assembly on Monday blasted the government’s “non-transparent” privatisation policy, and vowed to resist selling out of the state-owned entities at throwaway prices to “cronies”, at the parliament as well as challenging it in the court.
Opening the debate in the House on the government’s privatisation policy, parliamentary leader of the Pakistan Muslim League-Nawaz (PML-N), Khawaja Asif, alleged that the government deliberately defamed the state-owned entities such as the Pakistan International Airlines (PIA) to pave the way for selling out these to its “cronies and the ATMs”.
“We are not against the privatisation process, but it must be transparent and not to oblige your cronies and the ATMs by selling these at throwaway prices…These are national assets and nobody’s personal property,” he said, adding that the opposition would challenge any such move not only in the parliament, but would also approach the court, if needed.
He said that there existed a broad-based consensus among all the political parties that the state-owned institutions that were not profitable and were instead a burden on the national exchequer should be privatised through a transparent process.
“But what we have been hearing through the media and the social media and even the names of the ‘cronies and ATMs’ are being circulated to whom these entities will be sold out at throwaway prices…We will not let it happen,” he added.
He pointed out that the PIA and its Roosevelt hotel in New York were being sold out at a time when the airports across the world were closed and the hotel industry was facing severe crisis.
“Our collective concerns have now been proven. The PIA has been ruined through irresponsible statements by the aviation minister. While there is contradiction in what the minister has stated about the licenses of the pilots and what now the Civil Aviation Authority (CAA) has stated,” he added.
“Who are you pleasing with such statements? I will not name, but I know you are going to oblige your ‘foreign masters’ through such statements,” he further alleged.
At the same time, Asif also alleged the PTI government for selling those entities at throwaway prices to those who had funded the party in the elections. “Don’t return the ‘loans’ by selling out the PIA at throwaway prices to them…don’t increase the prices of medicines through this way to oblige someone to whom you are going to return the money,” he said, while referring to the recent 10 percent increase in prices of medicines.
Referring to the declaration of assets and nationalities of the prime minister’s advisers and special assistants, he said that the cabinet was part of the parliament and an offshoot of the House, adding that persons with dual nationalities could not be made a part of the federal cabinet. “If they [dual nationals] cannot sit in the parliament, how come can they sit in the federal cabinet by holding dual nationalities?” he asked.
“We are proud of being the elected representatives of the people and we are not those who came to the House through the support of the ‘ATMs’ or through a raising of any umpire’s finger [in our support],” he added.
About a proposed legislation to provide the right of appeal to Indian spy Kulbhushan Jadhav after a presidential ordinance lapsed on July 20th, Asif alleged that the government was going to make legislation aimed at facilitating the India spy.
“Our government had to face criticism from the PTI whenever there was no mention of Kulbhushan and now they are going to facilitate him,” he added. Pakistan People’s Party (PPP)’s Nafeesa Shah also questioned the government’s privatisation policy, saying that who was going to purchase the Roosevelt and Pakistan Steel Mills (PSM) at this COVID-19 pandemic situation.
She also demanded that a commission should be constituted to ascertain what benefits the country got from privatising the state-owned entities since 1990. “The government is going to privatise these entities, when there is a crisis in the world due to the COVID-19 pandemic…You’re happy that Trump has shown interest in purchasing Roosevelt. We will not let you sell our state assets out this way,” she added.
She defended the PPP’s previous government’s privatisation policy, saying that the PTCL was sold out to the UAE’s public sector entity – Etisalat. Instead of privatising these entities, there should be public and private sector partnerships, she added.
While responding to the opposition’s criticism, Minister for Communications Murad Saeed said that no decision had yet been taken to sell the Roosevelt hotel, adding that it was being discussed how to reduce the losses of the hotel.
“No entity is being sold out. It is up to the parliament to decide about the privatisation of the state entities,” he added. He lambasted the PML-N’s “dual standards”, saying that its one finance minister [Ishaq Dar] was an absconder, while another – Miftah Ismail – was ready to give the PSM at no price to those who would have purchased the PIA.
He also criticised the politics of the PML-N leadership, saying: “the elder brother [Nawaz Sharif] started his political career under General Jilani and General Zia, while the younger brother [Shehbaz Sharif] is talking about a ‘commitment’ under which he returned to the country from London”.
He said that the sugar prices soured to Rs140 per kilogramme during the PML-N government, and there was neither any inquiry nor any action taken.
He maintained that under the law, the advisers and the special assistants were not required to declare their assets, while Prime Minister Imran Khan allowed and declared the assets of the advisers and special assistants.
Copyright Business Recorder, 2020
SUPREME COURT TOLD: RS40BN NEEDED TO IMPLEMENT 3P PSM PLAN
Fazal Sher 17 Jul 2020
ISLAMABAD: The Supreme Court of Pakistan on Thursday questioned the government plan to run the Pakistan Steel Mills (PSM) on public-private partnership and sought a report from the federal government in this regard.
A three-member bench, headed by Chief Justice Gulzar Ahmed, while hearing the PSM employees’ case, told the federation’s counsel that “what you are going to do will lead to disaster. You are dealing with this important matter poorly.”
The chief justice remarked that according to the government lawyer, Section 11 of the Industrial Relations Act, 2012, will create obstacles in this matter but in court’s view it will be the main hurdle.
He said that due to this plan there will be more than 500 cases in courts and the government would have to give jobs to the same people.
The additional attorney general informed the court that the cabinet had not yet decided to lay off all employees of PSM.
Justice Ijazul Ahsan said according to the plan the government would lay off 95 percent of the employees and make fresh recruitment on contract basis.
At present, 320 PSM-related cases are pending before the high courts and 29 in Supreme Court, he added.
The PSM counsel told the court that Rs40 billion was required for the implementation of public-private partnership plan.
The court sought a report from the PSM, and adjourned the hearing for four weeks due to ailment of defence counsel Kamran Murtaza.
In the last hearing, the court had barred the federal government from selling the PSM’s land in order to pay gratuity and provident funds to its former employees.
The retired employees of the PSM in 2017 had filed a petition before the SHC and contended that they were not being paid their gratuity, leave encashment and provident funds since 2013.
They had submitted that gratuity and provident funds of retired employees had not been paid by the PSM despite court’s orders.
They had also claimed that the PSM had leased out its land worth billions of rupees but the retired employees were not paid their pension benefits and other dues.
The SHC in August this year had ordered the seizure of the accounts of the Ministry of Production till payment of gratuity and outstanding dues of over 850 retired employees of the PSM.
The federation has challenged the SHC’s order before the apex court and had also filed a review before the High Court.
Copyright Business Recorder, 2020
TRUMP WANTS TO BUY ROOSEVELT HOTEL, NA PANEL TOLD
Amin Ahmed 16 Jul 2020
ISLAMABAD: A top official of the Pakistan International Airlines (PIA) informed the National Assembly Standing Committee on Privatisation on Wednesday that US President Donald Trump has shown interest in buying the PIA-owned Roosevelt Hotel.
The revelation by the managing director of PIA Investments Ltd, Najeeb Samie, surprised the Privatisation Commission officials, who are starting the process for the transaction structure as decided by the Cabinet Committee on Privatisation, to identify a strategic investor who can make the PIA asset profitable.
Mr Samie said it was not profitable for the PIA to run the entire hotel on its own and it should be replaced with offices and hotels within the structure in New York’s mid-town Manhattan.
Mr Samie’s disclosure came when Khawaja Asif of the PML-N asked him whether anyone had shown interest in purchasing the hotel.
It had been decided to lease out the hotel on a long-term basis, the head of PIA Investments Ltd said.
A senior official of the Privatisation Commission told Dawn that the head of PIA Investments had never mentioned this breaking news in any meeting of the Privatisation Commission that discussed affairs of the PIA and Roosevelt Hotel.
Briefing the standing committee, Mr Samie stated that the 19-storey hotel incurred a loss of $1.5 million last year. Roosevelt Hotel’s structure being 100 years old is constantly in need of repair and maintenance, requiring substantial investments without corresponding returns.
Mr Asif said his party did not oppose privatisation but the time was not conducive for such an exercise since Covid-19 pandemic had badly affected the market prices of almost everything. At the same time, he said the rights of the employees should be protected whenever the privatisation is carried out. People who own real-estate businesses abroad should not be made part of the body deciding the hotel’s fate as it could lead to corruption, he said.
Privatisation Minister Muhammed mian Soomro informed the committee that certain options were being evaluated for the future of Roosevelt Hotel and a consortium of financial advisers would decide about the leasing of the hotel.
The Cabinet Committee on Privatisation in 2019 had directed the authorities concerned to carry out a feasibility study for appraisal of various management and financial options for gaining optimal returns from the hotel.
On Wednesday, the NA committee decided to share the report of Deloitte, a consulting and advisory company, with the committee before next meeting.
The ministry of privatisation informed the committee that a financial adviser was being appointed for evaluation and advice on different options. The committee suggested that it was not right time to make any decision on Roosevelt Hotel due to Covid-19 effects on economy and business environment. Moreover, it will not be a wise decision to sell assets and invest in a business which is making losses.
The hotel consisting of 1,025 rooms, meeting spaces, four restaurants and a rooftop lounge and named after President Theodore Roosevelt opened on Sept 22, 1924. The hotel was closed for an extensive $65 million renovation from 1995 to 1997. Beginning in 1979, the hotel was leased by the PIA through its investment arm, the PIA Investments Ltd, with an option to purchase the building after 20 years. In 1999, the PIA exercised this option and bought the hotel for $36.5m.
In 2005, the PIA entered into a deal with a Saudi partner that included the prince’s share in Hotel Scribe in Paris in exchange for $40m and the PIA’s share in Riyadh Minhal Hotel, located on property owned by the prince. The PIA has since 99 per cent shares in the hotel while the Saudis have only 1pc.
The secretary of the Aviation Division briefed the committee about the issue of suspected licenses of pilots and said that in 2018 a pilot pointed out some anomalies in examinations of pilots conducted by the Civil Aviation Authority (CAA). A committee was constituted in February 2019 to investigate the matter and the report was finalised in June 2019 and submitted to the prime minister.
The NA committee was also informed that the authority was further investigating the matter. Other international airlines are also referring cases for verification of licenses of Pakistani pilots working in these airlines and the authority has issued the clearances after verification.
The meeting was attended by MNAs Khawaja Saad Rafique, Zulfiqar Ali Khan Dullah, Umer Aslam Khan, Faheem Khan, Syma Nadeem, Mukhtar Ahmad Malik, Mohammad Shahbaz Babar, Mohammad Riaz, Mohammad Pervaiz Malik, Seema Mohiuddin Jameeli, Syed Hussain Tariq, Siknandar Ali Rahoupoto and the ministers for privatisation and aviation, beside senior officials of concerned ministries.
Published in Dawn, July 16th, 2020
SELL-OFF IS NOT THE ONLY SOLUTION
13 Jul 2020
EDITORIAL: Former Secretary Finance Younus Dagha put his finger on the pulse of the problems associated with poor performance in some privatised entities in Pakistan by cautioning that privatisation must not transform a public monopoly into a private monopoly. Competition, he further clarified, is critical when considering privatising any entity and cited the example of K-Electric, currently owned by an investment company, that is operating under an arrangement that allows it to revalue its assets to keep its returns on assets lower than what the claw back provision would have activated. In addition, KE was given multiyear tariff whereby all losses and non-recoveries to the extent of 35 percent were in-built in the end-consumer tariff which explains why the tariff was the highest in the country.
To add insult to injury, successive federal governments in their drive to equalize the tariff countrywide have been disbursing inter-Disco tariff differential to KE on average of about 50 billion rupees per annum, though last year the revised subsidy amounted to 59.5 billion rupees while in the current year 25.5 billion rupees is envisaged. And for the entire Wapda/Pepco network the budgeted inter-Disco tariff differential has been in excess of 201 billion rupees per annum while in the current year 124 billion rupees is budgeted though time will tell whether the government will be able to keep to this target. However, the government has pledged to the International Monetary Fund under its ongoing Extended Fund facility programme that it would target subsides before end-March (a condition that remained unmet due to the pandemic), ensure timely disbursement of power sector-related subsidies by streamlining the required auditing process and start legal process against defaulters (again unmet due to the pandemic).
There is an urgent need for the government to review its subsidy policy under inter-Disco tariff differential, a long standing demand of multilaterals, and allow each Disco to set its own tariff, based on its profit and loss accounts.
These views gained further traction in the country’s power corridors as Special Assistant to the Prime Minister on Power Nadeem Babar reportedly queried giving monopoly rights to buyers of distribution companies. He proposed privatising two Discos: (i) Islamabad Electricity Supply Company Limited whose audit report states that “Bank balances and trade receivables were misstated in the books of accounts of the Company to the extent of the amount of fraud. An internal inquiry committee in its interim report identified embezzlement of 207.75 billion rupees for the period July 2018 to June 2019; and (ii) Peshawar Electric Supply Corporation audit report notes that “the company has suffered a net loss of 46,952 million rupees (2018: 65,581 million rupees) for the year ended June 30, 2019 and that to-date the accumulated losses were 281,922 million rupees…the existence of material uncertainty which may cause significant doubt about the company’s ability to continue as a going concern.” These findings reinforce the perception that state-owned entities are beset by nepotism in senior appointments, inefficiency and corruption and privatisation is the way forward.
So far two administrations have launched revenue-based load-shedding, the ruling Pakistan Tehrik-i-Insaaf and the PML-N government, defined as shutting down supply to those feeders where receivables are higher than a certain percentage; however, critics argue that this has implied relatively poor areas of small provinces have been subjected to load shedding. And sadly, this approach has not dealt with inefficiencies and corruption that remain prevalent.
The government has pledged in the ongoing IMF programme (noted in the first review report dated December 2019) to “improve efficiencies and collections, the government will sign performance-based contacts with all Discos by end January 2020. The contracts will contain KPIs for improvement in collection, reduction in losses, and meeting the regulatory timelines for petitions submission, with mechanism to reward for performance and/or compensate for shortfalls. Discos will submit quarterly performance reports to Nepra and will be published in Nepra’s website.” Performance evaluation reports of Discos uploaded on the Nepra website are for four years – from 2013-14 till 2016-17 and there are no reports of the government actually signing performance-based contracts with Discos; however, introduction of surcharges agreed with the IMF will be implemented.
The government has not pledged to privatising Discos, no doubt because of failure by past administrations due to well organised workers opposition, however, the government does envisage seeking technical assistance from multilaterals on classifying state-owned entities into companies for sale, liquidation or retaining under state ownership by end September 2020 under the leadership of the Finance Ministry; however, here too the process identification may be completed though actual privatisation may be delayed because of the pandemic.
Copyright Business Recorder, 2020