Government Introduces New Rules To Expedite PIA Privatization

The Privatisation Commission board’s approval of new rules is set to accelerate the privatization of the financially distressed Pakistan International Airlines (PIA). The approved Privatisation Commission (Government to Government Agreement Mode – Manner and Procedure) Rules, 2023, enable the sale of state-owned enterprises through direct negotiations to foreign nations, establishing a minimum price through a competitive process.

The ongoing privatization of the national flag carrier has faced hurdles, but with these new rules, procedural requirements for selling entities will be streamlined. PIA, incurring estimated annual losses of Rs153 billion, has spurred efforts to divest the entity, once considered an asset.

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Pending approval from the Cabinet Committee on Legislative Cases (CCLC), the new rules could provide a mechanism to transfer privatization decisions to a cabinet committee, authorized to negotiate deals without resorting to open bidding.

Calls for PIA privatization emerged in the previous regime, leading to the appointment of a financial adviser expected to submit a consolidation report soon. The Privatisation Ordinance was earlier promulgated by the privatization ministry to circumvent legal challenges from high courts in privatization transactions.

PIA, a state-owned entity, has faced financial challenges, with freezing of accounts by the Federal Board of Revenue (FBR) and refusal of oil supply by Pakistan State Oil (PSO). Despite resolving disputes, the airline’s sustainability concerns have intensified, prompting policymakers to move towards privatization. Although efforts are underway, the complete privatization process is anticipated to take several months.