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ISLAMABAD: The government’s initial attempt to privatize Pakistan International Airlines (PIA) suffered a major setback on Thursday as it emerged as the sole bidder. blue world cityIt offered just PKR 10 billion for a 60 per cent stake in the loss-making airline – far below the government’s minimum sale price of PKR 85.03 billion, the Express Tribune reported.
During the publicly telecast bidding event, real estate developer Blue World City submitted its offer, which was only 12 percent of the government’s fixed price.
In dollar terms, the bid is equivalent to approximately US$36 million, a sharp contrast to the minimum sale price of US$305 million set by the Cabinet Committee on Privatization.
Before opening the bids, the Privatization Commission Board and the Cabinet Committee met separately, yet no government ministers attended the ceremony, which was attended only by two federal secretaries.
The Cabinet Committee had approved the minimum selling price following the recommendations of the Privatization Commission Board, and despite being invited to match the government’s offer, Blue World City declined to raise its bid.
“We have considered the government price and decided to stand by our best price of PKR 10 billion,” said Saad Nazir, owner of Blue World City. It was the only company to submit a bid after five other pre-qualified parties withdrew citing the government’s strict conditions regarding tax liabilities, guaranteed investment and employee retention, the Express Tribune reported.
The government’s efforts to privatize PIA, which ranks as the fourth largest loss-making entity in the country, came to a disappointing conclusion as Blue World City was the only firm to participate. The government had expected strong interest, especially after it spun off approximately PKR 625 billion in PIA debt into a separate holding company, leaving PIA with liabilities of PKR 202 billion and assessed assets of approximately PKR 163 billion.
Blue World City Chief Operating Officer Seham Raza expressed disappointment at the lack of competition. She commented, “I wish there had been healthy competition and I am saddened that all the other bidders have withdrawn.”
The government had offered 51 percent to 100 percent stake in the airline but ultimately decided to sell 60 percent. Additionally, it rejected bidders’ request for lower duty and tax exemptions and required the buyer to inject USD 500 million to USD 700 million into PIA to ensure operational sustainability, the Express Tribune reported.
Privatization Commission Secretary Usman Bajwa highlighted that PIA will not be able to achieve operational sustainability without fresh investments and resolution of its outstanding liabilities.
The failed attempt to privatize PIA could have a cascading effect on the government’s overall privatization strategy as it seeks to address its financial challenges.
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