The federal cabinet is reportedly unhappy at the privatisation of profitable State Owned Entities (SoEs), saying that principles of sell-off were not clear, sources in Finance Ministry told Business Recorder.
On October 1, 2019, the Cabinet was informed that the meeting of the Cabinet Committee on Privatisation (CCoP) held on September 18, 2019 approved inclusion of State Life Insurance Corporation (Slic ) as well as Islamabad Electric Supply Company (Iesco ) and part of Lahore Electric Supply Company (Lesco ) in active list of privatisation program. The meeting further considered a proposal for delisting of Telephone Industries of Pakistan (TIP) from the Privatisation Programme and approved it in view of the Ministry of Information Technology and Telecommunication's plan to revive TIP through a joint venture which had already been undertaken in consultation with TIP employees and Privatisation Commission.
The CCoP also approved a proposal by the Ministry of Privatisation for following a hybrid option for the privatisation of National Power Parks Management Company Limited (NPPMCL) comprising two RLNG-based power plants namely 1223MW Balloki Power Plant and 1230MW Haveli Bahadur Power Plant and instructed the Privatisation Commission to complete the bidding process by end December 2019. Under the approved plan, if the highest bidder for both plants remains the same, the bidder would be offered to buy the combined entity and in case the highest bidder for both plants is different, the de-merger would become a Condition Precedent (CP) to Transaction Closing (SPA). There would be a divestment of 100 % equity of stake of NPPMCL or both power plants.
The sources said on August 28, 2019, a meeting was held in Finance Division under the chairmanship of Dr Hafeez Shaikh wherein it was decided to initiate the privatisation process of the two Discos - Iesco and part of Lesco. Privatisation Commission was directed to prepare a summary for inclusion of both Discos in the privatisation program and hiring of Financial Advisor for the CCoP.
In terms of rule 17(1) of the Rules of Business, 1973, ratification of the Cabinet was solicited for the decisions taken by the CCoP in its meeting held on September 18, 2019.
During the discussion, members of the Cabinet raised concerns on the fate of earlier privatisation transactions and enquired whether any review had been carried out and lessons learnt.
"Questions were raised on the rationale of privatisation of profitable entities and prioritisation of various entities on the list," the sources added.
Some of the Cabinet members opined that it was not the government's job to run commercial enterprises. Another view expressed was that while there were no issues with the concept of privatisation, the principles were not clear.
It was also stated that profitable entities like State Life Insurance Corporation (Slic) were being listed for privatisation while at the same time a non-operational Telephone Industries of Pakistan (TIP) was being de-listed. A view was expressed that continued listing of an entity for privatisation for a long time badly affected its staffs morale and performance.
It was explained that the public sector enterprises were incurring losses of more than Rs 300 billion per annum which was not sustainable. No major privatisation transaction has taken place since a long time.
It was also clarified that banking sector entities which had a combined rate of return of zero per cent in the public sector increased their returns to the government a hundred times after privatisation in the form of dividends and taxes.
It was also clarified that there was no proposal to privatise government hospitals. On the contrary, the government intends to give greater independence and autonomy to the hospital managements to improve their service delivery.
Copyright Business Recorder, 2019
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