IMF agrees to 18pc GST removal if PIA privatised

WASIM IQBAL

ISLAMABAD: International Monetary Fund (IMF) agreed that if Pakistan International Airline (PIA) is privatised, 18 percent GST could be removed to encourage private sector investment in new aircrafts, a Standing Committee on Privatisation was apprised in a meeting held under the chairmanship of Muhammad Farooq Sattar here on Monday.

The committee was briefed on various aspects of PIA’s privatisation, and informed by the chairman Privatization Commission that the second attempt for PIA’s privatisation is fully ready, with several returning bidders and parties participating in the process.

In the previous round, bidders recommended waiving the 18 per cent GST imposed by the government on the induction of new planes and fleet expansion.

They believed that removing this tax would facilitate new aircraft acquisitions and support the growth of the aviation industry.

The liabilities of PIA amount to Rs45 billion, including Rs26 billion in taxation dues to the Federal Board of Revenue (FBR), Rs10 billion owed to the Civil Aviation Authority (CAA) and the remaining amount consists of pension liabilities.

The government presented these concerns to the IMF which agreed that if the PIA is privatised, the 18 percent GST could be removed to encourage private sector investment in new aircraft. A mechanism would be devised to address outstanding liabilities, ensuring that financial burdens do not become a hindrance for potential investors.

The committee was further informed that non-core assets are not part of the PIA’s bidding process. The government is formulating a separate policy for these assets, for which a consultant has already been hired, who has proposed two to three options to the Cabinet Committee on Privatization (CCoP).

The cabinet committee will adopt one of these options and issue a policy regarding non-core assets.

Privatization Committee Chairman Farooq Sattar emphasised the need to ensure job security for PIA employees for at least five years.

The Privatization Commission assured that employee protection remains a priority and will be finalised before bidding begins.

The committee discussed, “The Privatization Commission (Amendment) Bill 2024” (government bill), in detail.

The committee raised an objection to Clause 4, Section 7(4), stating that the Ministry of Law should clarify whether there is any precedent where the prime minister has been given the authority to make privatisation decisions instead of Cabinet. The committee directed the Ministry of Law to present relevant details in the next meeting. Thereafter, the committee deferred, “The Privatization Commission (Amendment) Bill 2024” (government bill), till its next meeting.

The committee discussed the privatisation of Discos. In the first phase, the privatisation of three Discos— IESCO, FESCO, and GEPCO— will be considered.

For this process, two firms submitted their bids, out of which, the board recommended the firm “Alvarez & Marsal Middle East Limited”. Afterward, the final bidder gave a presentation to the Minister of Finance and the Minister of Law, and eventually, they agreed with the bidder. They then directed the board to proceed with signing an agreement with the bidder.

Before the completion of the privatisation process, there are certain provisions that needed to be fulfilled. Power Division and NEPRA, in collaboration with the World Bank, have been working together to resolve these provisions.

The goal is to ensure that these issues are cleared before the bidding process, providing a solid platform for the bidders.