ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has approved State Support Agreement (SSA) for the outsourcing of Islamabad International Airport (IIA) through international bidding.
The meeting presided over by Finance Minister Ishaq Dar on Tuesday was informed that as the federal government has been considering various options to outsource the operation of major airports, the Pakistan Civil Aviation Authority (PCAA) signed a transaction advisory services agreement with the International Finance Corporation (IFC) in April 2023 after obtaining approval of the ECC.
The prime minister also constituted a Steering Committee headed by Minister for Finance to oversee the whole process of outsourcing of airports and decided that in the first instance, only Islamabad International Airport shall be considered for outsourcing, whereas, the two remaining airports – Jinnah International Airport, Karachi and Allama Iqbal Airport, Lahore – can be outsourced in the light of the experiences and insights gained from outsourcing of Islamabad International Airport.
Islamabad airport to be outsourced for 15 years: govt
The meeting was informed that the PCAA has now informed that the IFC in its “inception report” highlighted various issues which could hamper the smooth execution of the outsourcing and, thus, required immediate intervention/ policy decisions from the government.
The key issues cantered upon long-outstanding PIA receivables, the uncertain macroeconomic conditions of the country, the PCAA concession fee and tariff/ user charges escalation/ regulation mechanisms, fate of PCAA employees affected by outsourcing, and existing contractual arrangements at the airports.
Additionally, the IFC also recommended permission for the concessionaire and CAA to maintain a foreign currency account with the State Bank of Pakistan to ensure government can fulfil its obligations to ensure availability, convertibility and transferability of foreign currency and mitigate against the potential loss of revenue for the concessionaire due to foreign exchange volatility.
The IFC stated that improvement in service quality at the airports largely depended on the performance of government agencies working at the airports and in this regard, the IFC emphasised upon the need for a service level agreement between all these entities performing “reserve functions” and PCAA so that PCAA may not be held responsible for any breach of the agreed performance indicators. In fact, the PCAA will oversee performance of these reserve functions and report any breach thereof.
Any financial liability accruing from breach of any performance indicator by an entity performing a reserve function shall be undertaken by the government under State Support Agreement.
Additionally, the IFC also recommended that government would backstop PCAA payment obligations in the case of termination payments under all scenarios through the State Support Agreement.
Lastly, the concessionaire will be allowed to set-off any non-payment by PIA against PCAA revenue share under the concession agreement.
Under the State Support Agreement, government shall compensate PCAA for revenue loss on account of PIA under a separate agreement to be entered into later.
The Steering Committee agreed to all the proposals that led to preparation of agreement by the IFC.
The ECC also considered a summary of Ministry of Industries and Production regarding North Waziristan District (NWD) Single Entity Export Processing Zone. The meeting decided that mineral lease located in Muhammad Khel for area of 30 sq km (ML–30) and exploration lease located in Manzar Khel for area of 101 sq km (EL-101) be declared as NWD Single Entity Export Processing Zone under the EPZA Ordinance, 1980.
The ECC approved the proposed revised features of the SME Asaan Finance (SAAF) scheme as proposed by SBP with risk sharing facility of Rs12 billion for the government with Rs4 billion for 2023-24 and Rs7 billion for 2024-25.
On a summary moved by Ministry of Industries and Production regarding urea fertiliser requirement for Rabi season 2023-24 and considering the recommendations/ proposals of fertiliser review committee (FRC), the ECC decided that the SNGPL-based plants, i.e., Fatima Fertilizer (Sheikhupura) and Agritech may be allowed to operate beyond 31st August 2023 till 15th October 2023.
The ECC approved a summary of Pakistan Atomic Energy Commission regarding the issuance of government guarantee for Chashma Nuclear Power Project Unit-5 (C-5), within the IMF programme.
The Ministry of National Food Security and Research submitted a summary for extension of Financial Schemes of Kissan Package 2022.
The ECC allowed extension in time period as per fiscal space available till 31 December 2023 to financing schemes of Kissan Package including the; (i) provision of subsidy for interest-free loans for subsistence farmers in flood affected areas; (ii) PM’s Youth Business and Agriculture Loan Scheme (PMYBALS); (iii) mark-up subsidy and risk sharing scheme for Farm Mechanization (MSRSSFM), as well as, interest-free loan to landless farmers in the flood-affected areas.
Copyright Business Recorder, 2023