The government has decided to sell the engineering department of the national airline to the Pakistan Air Force for 6.5 billion rupees, the summary of which will be presented in the federal cabinet.
A senior government official The Express Tribune said that the value of Precision Engineering Complex (PEC) is Rs 6.5 billion, which includes Rs 4 billion for pension related liabilities of current and retired employees.
The government will have to pay 2.5 billion rupees in cash in the next 5 years for Pakistan Air Force to buy this sector.
Apart from this, it will also pay the dues of 3 billion rupees in the form of pension and provident fund of 259 employees who will retire in the next ten years.
Similarly, the estimated pension and provident fund dues of the existing 251 employees will also incur another Rs.1.1 billion.
Note that PEC is a business unit of the national airline that manufactures high precision components for the aerospace industry and several other industries.
Government sources said that a ministerial committee has already approved the transfer of this unit of PIA to Pakistan Air Force at a total cost of Rs 6.5 billion.
He added that now a formal summary is being submitted to the Federal Cabinet for approval.
Note that the PEC has already been separated from the core PIA.
As of the end of December last year, PEC’s total assets were worth Rs 1.2 billion while its total liabilities were estimated at Rs 2.9 billion.
Its net negative equity at the time of determining its sale price was Rs 1.73 billion.
The government official further said that the Pakistan Air Force will get the PEC at a total cost of Rs 6.5 billion.
It should be noted that Prime Minister Shehbaz Sharif formed a four-member ministerial committee headed by Finance Minister Muhammad Aurangzeb.
The committee approved the transaction structure to transfer PEC ownership to PAF, sources said.
The members of this committee included the Minister of Defense and Aviation and the Minister of Privatization.
The ministerial committee reviewed the assets and liabilities for the sale of the sector and determined a total price of Rs 6.5 billion under the discounted cash flow method.
The cost includes land, infrastructure, machinery, equipment and human resources.
Apart from this, the terms of the contract of the employees will remain unchanged. Existing employees will be entitled to equal pay and allowances, medical services, air passage allowances, pension and provident fund.
Pakistan Air Force will also be responsible for financial arrangements to continue the existing operations of the national airline’s purchased sector “PEC”.
It may be noted that the government had tried to privatize PIA in October even though five of the six shortlisted bidders walked out and did not submit financial bids.
At which the government tried to sell PIA to the sole bidder, a real estate developer who had offered Rs 10 billion against the minimum reserve price of Rs 85.03 billion.
Later, Privatization Secretary Usman Bajwa told a parliamentary committee last month regarding the failure of the bid that the bidders wanted the government to pay tax liabilities worth Rs 26 billion, bridge financing worth Rs 10 billion from the Civil Aviation Authority. And 9 billion rupees to waive other liabilities.
However, Privatization Minister Abdul Aleem Khan had said that the failed attempt to sell PIA was due to lack of cooperation from the Finance Ministry which did not accept the legitimate demands of the bidders.
He also held the caretaker government responsible for finalizing the poor structure of the privatization transaction where it left a negative equity of Rs 45 billion on PIA’s balance sheet despite clearing liabilities of Rs 623 billion.
