Privatizing PIA: Groundbreaking Transformation and Its Impact

Privatizing PIA: Groundbreaking Transformation and Its Impact

Privatizing PIA

Privatizing PIA:Privatization in the past 

With the arrival of a new economic pattern in the 1980s, s, the IMF also pressured various states of the World to go for privatization. In the Structural Adjustment Program of IMF, it was suggested that states needed to privatize loss-making institutions. A Plethora of countries accomplished privatization including the US, the UK, Chile, and Italy, to name some. Pakistan also accomplished privatization from 1990 to 2013. 67 state-owned enterprises were privatized by Pakistan. 

Result of Pakistan’s privatization

 In the case of Pakistan, no significant change was seen; 44 percent of institutions performed the same; 34 percent of institutions performed worse; and 22 percent of institutions performed well. All in all, above 70 percent of institutions had had no good result. Thus, Pakistan had a bad experience of privatization. Still, privatization is advocated in order to curtail spending thus lowering the budget deficit. Privatization of PIA In a meeting by the privatization commission privatization of PIA was discussed and a vivid timeline was agreed. Fawad Hassan Fawad, minister for privatization presided at the meeting. 

With different stakeholders, detailed discussions were held. PIA management and the aviation division were present in the discussion. However, in a press release by the privatization commission, no details of the proposed timeline were mentioned. It is vivid that for its operational requirements, PIA is entirely dependent on the government. Under the government of Pakistan guarantee limit, PIA has recently negotiated new credit facilities for financial institutions. The lack of funds to obtain spare parts to keep the grounded aircrafts operational is the main cause of this state of affairs. 

Privatizing PIA

The PAI management is blaming soaring global oil prices and poor exchange rates for its financial crisis. On one side, due to safety concerns, its international flight operations were curtailed, whereas, on the other side, private airlines are giving it a tough time on domestic routes. 

It seems that due to huge debt and other financial liabilities, the airline's future is not bright. Some employee groups are also seen raising their voice against the planned privatization.PIA has a total loss of 713 billion PKR, out of total merely 19 aircraft are operational, in which 15 are leased. Among these 15 6 are grounded which are giving cost of 5 million per month. Assets including core engineering services, landing rights, routs, and sir services agreements are identified for sale. 

The most valuable assets are landing rights and routes. The main question is the real value of the 19 aircraft for the buyer in accordance with the flight worthless. 

Why does Pakistan need privatization? 

1 Reducing the budget deficit

 Some institutions like Pakistan Steel Mill, Pakistan Railway, WAPDA, and PIA, to name some, are giving losses of 600 to 800 billion PKR annually.

 2 Efficiency of the private sector

 The private sector is much more efficient in comparison with the private sector. For example, PTCL after privatization became more efficient from 2005 to 2014.

 3 Competition

 Privatization promotes more competition among institutions. In the case of nationalization, there would be no competition among institutions.

 4 Attracting FDI (Foreign direct investment) 

Privatization attracts FDI. From 2001 to 2008, due to privatization, huge FDI was recorded