Federal Government Unveils Major Privatization Plan for 24 Public Entities
The federal government of Pakistan has announced a significant privatization initiative, revealing plans to privatize 24 Public Sector Entities during the current year. This ambitious program includes three major airports, five power distribution companies (DISCOs), and two generation companies (GENCOs), marking a substantial shift in the government's approach to managing state-owned assets.
PIA Privatization Completed Successfully
During a briefing to the Senate Standing Committee on Privatisation, officials confirmed that the privatization of Pakistan International Airlines (PIA) has been successfully completed. The government emphasized that no concessions were granted to any bidders throughout the process, ensuring a transparent and competitive environment.
The Privatisation Secretary clarified that although a petition against the Arif Habib Group remains pending in the Supreme Court, this does not constitute grounds for disqualification. All bidders underwent rigorous scrutiny by the Financial Monitoring Unit, with additional reports obtained from international institutions including the World Bank and domestic agencies like the Federal Board of Revenue (FBR).
Financial Structure and Future Projections
Under the proposed structure for PIA, the government will retain a 25 percent shareholding valued at approximately Rs45 billion. The financial close of PIA's privatization is expected within three months, during which the consortium is set to invest Rs125 billion in the airline and deposit Rs10 billion with the government.
Currently valued at Rs9 billion, PIA's valuation is projected to increase dramatically to Rs180 billion following the financial close. The business plan for the national carrier will be presented within a month, with plans to expand the airline's fleet to 40 aircraft over the next four years.
Rationale Behind Privatization Decision
The Secretary highlighted that shutting down PIA would have cost the government approximately Rs300 billion, including liabilities and Rs34 billion in payments to pensioners. Privatization was deemed a more viable option than closure, as it prevents further fiscal losses while ensuring continuity of national air services.
Secretary Privatization Commission Usman Bajwa noted that PIA's direct flights to the United Kingdom have already resumed, with negotiations ongoing to reopen US routes. He emphasized that privatization represents a strategic move to enhance operational efficiency and financial sustainability.
Expansion of Privatization Commission
The Prime Minister has directed an increase in the capacity of the Privatisation Commission and instructed that the overall privatization program be fast-tracked. Currently operating with six consultants, the commission plans to hire top market consultants to support the expanded workload.
While committee members raised questions about the need for new hiring given the successful PIA privatization with existing staff, the commission clarified that specialized market experts are essential. A single expert can manage only up to two privatization projects simultaneously, and sector-specific expertise—particularly for DISCO privatization—is crucial for success.
Committee Discussions and Recommendations
The committee held detailed discussions on the PIA privatization process, examining various aspects of the transaction. Senator Palwasha Muhammad Zai Khan requested comprehensive information regarding properties of PIA Holding Company Limited, including hangars, spare parts, and technical assets, with assurance that this data will be provided in the next meeting.
Committee Chairman Senator Dr Afnan Ullah Khan commended the ministry and Privatisation Commission for the successful PIA privatization. The entire privatization process is expected to be completed within 90 to 120 days, according to commission officials.
Airport Services Outsourcing Initiative
The committee was also briefed on the outsourcing of landside services at Islamabad International Airport. Members highlighted deteriorating passenger facilities including food services and restrooms, noting that outsourcing could significantly improve service delivery since governments are not ideally positioned to manage commercial operations.
The commission confirmed that outsourcing airport services remains a priority area. The committee recommended that outsourcing at major airports be combined with smaller airports such as Quetta and Sukkur to ensure uniform service improvements rather than reallocating resources later.
The chairman directed the commission to expedite the process and assured full committee support for enhancing airport facilities and services. He also emphasized the importance of safeguarding passengers' personal data throughout the outsourcing process.
Financial and Administrative Considerations
The committee was informed that the Ministry of Privatisation has no ongoing Public Sector Development Programme (PSDP) projects and therefore does not require PSDP allocations. This reflects the ministry's focused approach on privatization rather than development projects.
The chairman appreciated the commission's efforts and agreed in principle with the proposal to hire experts to enhance operational capacity. This strategic hiring is expected to facilitate the successful implementation of the broader privatization program encompassing multiple sectors of the economy.
