Pakistan International Airlines (PIA) is reportedly defaulter of Federal Board of Revenue (FBR) for not depositing Rs 6 billion as Federal Excise Duty deducted from employees' salaries. This interesting revelation was made by Chairman FBR in a recent meeting of Economic Coordination Committee (ECC) of the Cabinet.
Aviation Division revealed that PIACL was going through a difficult period due to continuous losses and severe cash flow crises, hampering operations. Various suppliers have stopped supplies to PIA due to non-payments and lessors are giving default notices. The situation needs immediate redressal otherwise it could result in disruption of operations and services. PIACL has submitted its funds requirements for the period July - December 2017 as follows: (i) GoP guaranteed loan installments, Rs 17.017 billion; (ii) non-GoP guaranteed loan installments, Rs 7.132 billion; and (iii) mark up payments, Rs 6.113 billion. The grand total is Rs 30.262 billion
Aviation Division further stated that PIACL would endeavor to pay the Non-GoP guaranteed principal installments totaling PKR 7.132 billion from its own resources. The GoP guaranteed principal installments totaling PKR 17.017 billion would be settled through roll-over of guarantees with the assistance of Ministry of Finance. However PIACL would need support for the mark-up payments totaling PKR 6.113 billion.
The status of GoP guarantee limit assigned by ECC to PIACL as on 30th April, 2017 is as follows: (i) guaranteed limit assigned by ECC, Rs 161.50 billion; and (ii) GoP guarantees outstanding, Rs 161.50 billion. Aviation Division apprised that during a recent meeting with Prime Minister, PIACL requested support of the Government towards following Capital expenditure: (i) engineering projects, Rs 2.00 billion; and (ii) ground support, Rs 1.00 billion.
Furthermore, PIACL needs to construct certain operational facilities at New Islamabad International Airport (NIIAP) project site for which space has been allocated by CAA. These facilities include construction of a Flight Kitchen, Wide Body Aircraft maintenance/repair Hangar and Technical Ground Support equipment area/handling offices which besides saving costs would also generate additional revenue, especially in the backdrop of CPEC market growth/demand was anticipated. The total estimated cost of the civil, electrical and layout etc of the PIACL facilities is about PKR 6.90 billion.
Finance Division has examined the proposal and agreed to provide GoP guarantee up to a rationalized limit of Rs 13.585 billion as per following breakup, subject to the approval of ECC:- (i) mark up payments (GoP Guarantee Loans), Rs 5.238 billion;(ii) engineering project, Rs 2.0 billion;(iii) ground support equipment, Rs 1.0 billion;(iv) construction at NIIAP project site (2017-18) , Rs 5.347 billion, totaling Rs Rs 13.585 billion.
Finance Division has further recommended that PIACL may formulate a comprehensive debt retirement plan on long term basis, rather than seeking more loans to pay off the existing ones, since continuous borrowing is not only unsustainable but may even affect PIA as a going concern. The meeting was informed that PIACL has formulated a comprehensive business plan to be presented to the Federal Cabinet. The debt retirement plan is an essential component of the business plan to revive PIACL on a sustainable basis.
During ensuing discussion, Chairman, FBR claimed that PIACL was not depositing Federal Excise Duty deducted from the salaries of its employees since long. In this regard, an amount of Rs 6.00 billion is outstanding against PIACL. Secretary, Aviation Division assured the meeting that they will soon deposit tax amount from July 2017 onward. However, for outstanding tax amount prior to July, 2017, they may be given some time. The example of Turkish Airlines was quoted which was going into huge loss some years ago but now has become one of the leading Airlines of the world due to strict implementation of business plan designed for its revival.
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