The government will sell a PIA business unit to the Pakistan Air Force for Rs2.5 billion in cash. This amount is merely a quarter of what a sole bidder offered for 60% of the shares.
The senior official said the total value of the Precision Engineering Complex (PEC) is Rs6.5 billion. This includes Rs4 billion for pension liabilities of active and retired employees. PEC, a maker of high-precision aerospace parts, is now a non-core asset.
Sources indicate that a ministerial committee has approved transferring PEC to PAF for Rs6.5 billion and is now seeking federal cabinet approval. As of last December, PEC had assets worth Rs1.2 billion against liabilities of Rs2.9 billion, leading to a net negative equity of Rs1.73 billion.
Under the terms, PAF will pay Rs2.5 billion within five years and take on Rs3 billion in pension liabilities. These liabilities pertain to 259 retired PEC employees for the next decade. PAF will also handle Rs1.1 billion in pension obligations for 251 current employees.
The Prime Minister formed a four-person team, chaired by Finance Minister Muhammad Aurangzeb, to manage the sale. This committee, including the ministers for defense, aviation, and privatization, was to finalize the asset and liability transfer to PAF.
A subcommittee led by the corporate finance secretary reviewed the assets and liabilities. Using the discounted cash flow method, they determined a total price of Rs6.5 billion, which includes land, infrastructure, and human resources. PAF will create a special-purpose vehicle to handle the transaction while maintaining existing employment terms.
After a failed privatization attempt in October, in which only one bidder participated, the government faced setbacks. The bidder, a real estate developer, offered only Rs10 billion against a reserve price of Rs85.03 billion. According to Privatization Secretary Usman Bajwa, the potential buyers requested a write-off of Rs45 billion in various liabilities.
Privatization Minister Abdul Aleem Khan blamed the Ministry of Finance for not supporting the sale. He noted that despite PEC’s Rs1.73 billion negative equity, the finance ministry completed a Rs2.5 billion cash deal. At the end of last year, PEC’s assets and liabilities included property, spare parts, receivables, and payables.
