Exchangeable Bonds: National Assembly panel rejects sale of 10 percent OGDCL shares

A parliamentary panel on Tuesday rejected the proposed sale of 10 percent shares of Oil and Gas Development Corporation Limited (OGDCL) through Exchangeable Bonds in international market for raising $500 million. The National Assembly standing committee on privatisation, which met here with Malik Bilal Rehman in the chair, said such transactions come under the purview of the ministry of finance.
The members were of the view that it is not a privatisation of any entity rather it''s a drive to raise money for the government and the committee is unable to recommend its approval. Secretary privatisation ministry Imtiaz Kazi briefed the committee about proposed float of 10 percent of the Exchangeable Bonds of OGDCL in international market.
At present, he said the government has 75 percent share in the OGDCL and 10 percent share would be floated in the market. Main purpose of the government move was to generate $500 million for debt retirement and poverty alleviation in the country.
Such amount will be considered a debt for three years and after this period, investor can redeem his capital or the bonds might be converted into shares. The government will pay 5.2 to 7.2 percent interest on it, he added. The committee asked the ministry to first complete the process to check whether it comes under the purview of privatisation process or not. MNAs Khawaja Sohail Mansoor, Muhammad Pervez Malik, Khawaja Muhammad Asif and Abdul Qadir Baloch termed it a fund raising move adding that it doesn''t come under the purview of this committee. They said why the government was selling profitable entities for debt retirement?
Khawaja Sohail Mansoor informed the committee that a Dubai-based company was ready to invest in the bond and claimed that it was an opportunity for some people to get black money whitened in such a way. The committee decided that in the next meeting the secretaries of cabinet, petroleum and natural resources, finance and law division should explain to them the transaction process. Approval of the sale of 10 percent OGDCL share was deferred till next meeting.
Minister for Privatisation Rana Tauseef and state minister Ghous Bakhsh Mehr told the committee that the main purpose of the ministry was to proceed with privatisation process of any entity, which is forwarded by the appropriate authority. "We are unable to explain as to why such entities are offered for privatisation," they added.
About actual receipts of privatisation proceeds in 2010-11, the secretary informed the committee that no privatisation was done due to global financial crises and low investor appetite. However, the Privatisation Commission received Rs 213.35 million in November 2010 from Army Welfare Trust as first instalment of interest on account of the privatisation of Wah Cement (now called Askari Cement Limited).
The second instalment of Rs 213.35 million is expected by end of May 2011. He said the PC received Rs 12.43 million from M/s Al Hashim Brothers on account of privatisation of A & B Oil Mills, Karachi. He said actual total receipts of current fiscal year 2010-11 stand at Rs 225.78 million.
The committee expressed astonishment over spending of Rs 227 million on flood-related activities in 2010 and Rs 261 million on media campaign by the ministry of privatisation. Khawaja Asif asked the Supreme Court to take suo motu action. Imtiaz Kazi informed the committee that Roosevelt Hotel New York, Printing Corporation of Pakistan, Republic Motors and Sindh Engineering Corporation were removed from privatisation list.
However, the CCI in its meeting on April 28, 2011 clarified the privatisation of Wapda Power Wing (already approved in 1997 and 2006) by allowing privatisation of three generation companies (Gencos) and nine distribution companies (Discos). Besides, OGDCL Exchangeable Bond, the upcoming transactions are National Power Construction Company (NPCC) and Heavy Electrical Complex (HEC), expected to be privatised by September 2011, the secretary said.