The government has made a renewed effort to privatise the Pakistan International Airlines (PIA) following a previous attempt where the Privatisation Commission attracted only a Rs10 billion bid for the national flag carrier against the valuation of Rs85 billion.

The “lack of buyer interest” in the initial privatization round stemmed from several factors, including an 18% GST on new aircraft purchases and the airline’s considerable liabilities, Dawn reported.

Cash-strapped Pakistan is looking to offload a 51-100% stake in debt-ridden PIA to raise funds and reform bleeding state-owned enterprises as envisaged under a $7 billion International Monetary Fund programme.

It merits mentioning that the national carrier is a public limited company, with approximately 96% of its capital owned by the government.

PIA operates in various business sectors, including passenger services, ground handling, flight training, cargo, engineering, and in-flight catering.

Officials informed the National Assembly Standing Committee on Privatization on Monday that the government has eliminated the 18% GST on new aircraft to attract potential investors.

The Privatization Commission chairman told the committee that the International Monetary Fund agreed to the tax removal after the government outlined its concerns.

The PIA faces liabilities totalling Rs45 billion, including Rs26 billion owed to the Federal Board of Revenue for various tax obligations, Rs10 billion to the Civil Aviation Authority, and the remainder consists of pension liabilities, they added.

To facilitate potential investors, the committee noted that a plan would be developed to resolve outstanding issues.

It was clarified that the airline’s non-core assets would not be included in the bidding process, and a consultant has been engaged to create a separate policy for managing those assets.

The consultant has presented two to three options to the Cabinet Committee on Privatization (CCoP), which would review them and formulate a policy regarding non-core assets. The CCoP is expected to choose one of such options to guide future decisions on such assets.

The committee also addressed the Privatisation Commission (Amendment) Bill 2024 and raised concerns about certain provisions within it. It requested clarification from the Ministry of Law on whether there was any precedent for granting the prime minister the authority to make privatisation decisions instead of the entire cabinet.

The committee instructed the ministry to provide relevant information in the next meeting. Subsequently, discussions on the bill were postponed until the following gathering.

Last year, an overseas Pakistani group offered Rs100 billion for the national airline. The Al-Nihang’s Group has set seven conditions, including Rs100 billion for the PIA acquisition, assuming responsibility for all existing PIA liabilities, estimated at Rs250 billion, and ensuring full payment of outstanding obligations as part of the proposal.

According to the proposal, all PIA employees would be retained for two to three years, with the company committing to the “continued payment of their salaries and proportionate fringe benefits.”

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In January, the PIA got a boost when it resumed flights to Europe, starting with Paris, after the EU aviation regulator lifted a ban on the national flag carrier.

PIA’s authorisation to operate in the EU was suspended in June 2020 over concerns about the ability of Pakistani authorities and its Civil Aviation Authority to ensure compliance with international aviation standards.

The government has expressed hope flights to the United Kingdom would also resume after the Britain’s Department for Transport visit to Pakistan.