While rejecting the sale of $500 million in exchangeable bonds of the Oil and Gas Development Company Limited (OGDCL), the National Assembly Standing Committee on Privatization decided to summon Cabinet Committee on Privatisation to ascertain whether the government can opt for equity instruments for budgetary support as the law only allows the use of privatization proceeds for repaying debt and poverty alleviation programmes.
The committee also rejected the inclusion of power distribution companies (PEPCO) and generation companies (GENCOs) in the privatisation list and decided to summon the representatives from the Ministry of Water and Power, Secretary Cabinet, Finance and Law to decide whether shares of such companies can be put up for sale. The meeting of the committee was held under the chairmanship of Malik Bilal Rehman. The officials of the Privatisation Commission (PC) informed that consortium lead by four banks was appointed as financial advisor for the sale of the 10 percent shares of the government holding in the OGDCL.
The government aims to generate $500 million by offering interest in the range of five to seven percent for tenure of three years. The government with a 74.82 percent stake in OGDC, plans to issue bonds equivalent to 430 million OGDC shares if fully converted, or about 10 percent of the company’s issued share capital. Firing the first salvo, Khwaja Sohail Mansoor of MQM said that the concept of exchangeable bonds was not clear, as the government was looking to overseas investors for a paltry sum of Rs45 billion which could be easily generated from the local stock exchange.
Then his hunch came as he said it appears that somebody influential wants to whiten his $500 million within three years and by also earning a profit of six percent during the tenure. PC officials offered the argument that the local capital lacked the depth to generate the required amount. PC Secretary Imtiaz Kazi said that the exchangeable bond was being floated to take Pakistan back to the international capital markets. Abdul Qadir Patel of PML-N opined that there was no urgency to sell shares of a profitable entity, as budgetary support could be obtained from the IMF and World Bank at much cheaper rates.
Khwaja Sohail Mansoor stressed that there should be a clear policy and it was essential to determine whether the law allows sale of assets for budgetary support. The committee decided to summon the cabinet committee on privatization to firstly decide whether the law allows the government to borrow money by selling shares of blue chip companies. Elaborating on the number of entities on the privatisation list, Imtiaz Kazi said that there were 58 entities in total which included nine distribution companies and three generation corporations.
He said the government had carried out no privatisation during the current fiscal year but plans to privatise National Power Construction Company (NPCC) and Heavy Electric Complex (HEC) by September this year. He said, PIA’s Roosevelt Hotel in New York was removed from the list due to low real estate prices in USA, while Printing Corporation of Pakistan was removed as the Karachi City District Government and Capital Development Authority had warned that they would recover their land if the entity was privatised.
Minister for Privatisation Ghous Baksh Mehar said that transfer of land titles was a major issue that had withheld release of $800 million from the UAE owned Etisalat for settling the outstanding dues of PTCL. However, he said, a previous privatisation minister was also responsible he signed a contract that was highly tilted in favour of Etisalat. PC Secretary Imtiaz Kazi informed the committee that the government has allowed inclusion of distribution companies (DISCOs) and generation companies (GENCOs) while the process would be started with the selling of Islamabad Electric Supply Company (IESCO).
The members of the committee wanted to understand the logic behind disposing off profitable entities.
