Pakistan delays bidding for sale of national airline to Oct 31

The Pakistan government has delayed the bidding process for the privatization of the national airline to October 31 on the request of pre-qualified bidders as they needed more time, sources informed Nukta on Sunday.

The government had previously announced that the bidding process for Pakistan International Airlines (PIA) would be held on October 1.

Earlier in June, the country's Privatization Commission had pre-qualified six bidders — Fly Jinnah, a consortium led by YB Holdings (Pvt) Ltd, Airblue Ltd, a consortium led by Pak Ethanol (Pvt) Ltd, Arif Habib Corporation Ltd and Blue World City — to bid for a 60% stake in PIA.

The sources informed Nukta that the prequalified bidders had made several demands to the government, all but one of which had been rejected.

Pre-qualified bidders' demands

The sources said that the pre-qualified bidders had demanded the government exempt PIA tickets from the Federal Excise Duty (FED) which was significantly hiked in this year's budget.

However, this was rejected by the Privatization Commission, which stated that the government cannot give any tax exemption on tickets under the International Monetary Fund (IMF) program. This would create a distortion in the tax system and may lead to unequal treatment of airlines.

Pakistan has been gradually withdrawing tax exemptions on IMF directions, with the withdrawn amount reaching PKR 434 billion during the current year.

Sources said that bidders also asked the government to consider a five-year installment plan with one to two years moratorium of overdue tax payments post-privatization.

In addition, they also asked the government to consider providing an indemnity to the purchaser, covering all legal and tax litigations and claims prior to closing.

Furthermore, the pre-qualified bidders also asked the government to consider exempting the general sales tax on aircraft inductions for three to five years or consider restructuring them in installments over the lease term.

However, the government rejected all demands except for the payment of pending dues in installments, the sources said.

The Privatization Commission, on the advice of the country's tax collection authority, communicated to bidders that they can get approval of the installment of pending dues by applying to the concerned tax commissioner.

Sources said that about PKR 26 billion is the amount of tax under litigation or stayed by various courts against PIA.

PIA's assets

The total value of the PIA's assets is PKR 171.43bn whereas the national airline's outstanding loans are PKR 830bn, according to the sources.

The government has made a plan to transfer PKR 146.57bn of assets to the new management of the PIA, while assets worth PKR 24.86bn will remain with the holding company.

On the other hand, out of the national airline's total loans, PKR 202bn will be borne by the PIA and PKR 628bn by the holding company.