Govt’s Move to Split PIA’s Core Businesses Hits a Roadblock

The government will most likely miss yet another deadline for formulating a plan to separate PIA’s core and non-core businesses.

The reason behind this delay is that finance ministry isn’t willing to take up loans of Rs 250 billion for PIA’s current loans . The government is yet to make any viable plan that outlines how these loans will be paid back and how the revenue stream will be functional.

No Privatization and No Separation

After the government failed to privatize the national flag carrier, a bill called PIA Conversion Act 2016 was passed by parliament to devise a plan to separate PIA’s core and non-core businesses. The deadline for this plan was set to be 15th April 2018.


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However, as of now, no financial arrangements regarding debt payments have been finalized. It is highly likely that the plan won’t be finalized by 15th April. If that happens, then the Companies Act 2017 would be required. In that case, the court will approve and implement the plan regarding PIA matters which will take at least 6 months to a year.


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The Meeting

Federal Minister for Privatisation, Daniyal Aziz, is handling the matter and wants to complete the job within the deadline. For that, a meeting was called up involving officials from Civil Aviation Authority, the Aviation Division, PIA, SECP and Ministry of Finance.

The participants of the meeting couldn’t reach a final agreement due to reservations of the finance ministry. According to the proposed plan in the meeting, the government will have to take a hit for PIA’s “bad loans”. These loans amount to Rs 225 billion to Rs 250 billion.


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No plan about how this money will be generated was presented at the meeting. Furthermore, the finance ministry will also have to bear the annual financing cost of PIA that is estimated to be around Rs 18 billion.

Consequently, finance ministry didn’t agree to the terms of the plan. The official of the ministry said;

This bad money has to be parked somewhere, but we do not know the revenue stream that can gradually lessen this burden from the finance ministry’s shoulders

According to a previous arrangement, the government will keep control of non-core assets like PIA-owned hotels and buildings. As per the previous assessment, these assets were worth $600 million. Privatisation ministry told;

It was proposed in the meeting that non-essential assets including Roosevelt, Hotel Scribe, domestic and foreign properties and the Precision Engineering Complex will be kept by the government.

Daniyal Aziz added that division of PIA into two entities will not affect the employees. They will continue working as they are working now. The minister said;

There was no impact on employees whatsoever and they will continue to perform their duties as they are performing now.

There is no word about how the government plans to handle PIA’s outstanding liabilities.