A Receivable Committee has recommended putting names of defaulters of privatisation sales proceeds on the Credit Information Bureau (CIB) and send their cases to anti-corruption watchdog as the outstanding dues surge to over Rs126 billion or one-fifth of the sale money.
The board of privatisation commission has unanimously adopted the Receivable Committee report in its meeting held on July 29 this year, according to the Ministry of Privatisation documents. After the endorsement of the report by the board, it is now binding on the government to refer these cases to CIB and National Accountability Bureau (NAB). If a company or individual’s name is on CIB, it cannot borrow money from any financial institutions.
Spokesperson of the Ministry of Privatisation Samreen Zehra did not give her version of the story.
The Pakistan Tehreek-e-Insaf (PTI) government had set up the Receivable Committee about two years ago that reviewed every privatisation transaction since 1991 and also found glaring “anomalies” that caused huge losses to the state.
The privatisation programme started in 1991 and 142 entities have been either sold out or shares were divested in return of Rs649 billion. However, about 20% of it remains unrecovered as of December 2018.
“As per committee’s working our total receivables are estimated at Rs126.5 billion as of December 2018,” according to the Receivable Committee report. The Etisalat - which bought 26% stakes in the PTCL, was the single largest defaulter that according to the report owed Rs121 billion on account of privatisation proceeds, including Rs8.9 billion in dividend payments.
At the current exchange rate the liabilities against Etisalat would increase to Rs142 billion, which will take the total outstanding privatisation proceeds to Rs148 billion.
“Recovery of dues did not receive the due importance as the fresh disinvestment captured the main focus and the situation was further worsened by litigations initiated by the buyers to either delay the payments or extract concession.”
The PTI government is also in the process of selling the shares of the Oil and Gas Development Company (OGDCL) and Pakistan Petroleum Limited (PPL), apparently at throwaway prices despite opposition from the Petroleum Division, said sources in the privatisation ministry.
The report underlined that while reviewing the calculations of receivables from the buyers some interesting anomalies were noted which have the effect of either understating the government’s claim or completely ignoring the rightful claim.
In some cases receipts were first adjusted against the principal which, was contrary to general accounting and banking practice, according to the findings. In other cases the receipts were adjusted against overdue mark-up. The Sale Purchase Agreements (SPAs) did not provide any adjustment procedure.
The committee noted that the management control of these entities was transferred to the buyers on receipt of down payment and the balance was receivable as per agreed schedule. Some of the buyers defaulted in payments and are still defaulting for the last 25 years.
The committee report said that this duality of treatment has resulted in drastic reduction in the claims. As per Privatisation Commission records there are 13 units (excluding Etisalat) where full payment has not been received by the government. Owing to anomaly in adjustment method, the Privatisation Commission records were showing a receivable amount Rs1.2 billion as against Rs2.4 billion, depicting an implied loss of Rs1.3 billion. The privatisation board decided that receivable figures should be incorporated in the audited accounts. But the accounts of the commission were not up to date.
“The Privatisation Board unanimously adopted the Receivables Committee Report and directed to reconcile all the PC Accounts for previous years since 2013-14 till to-date,” according to the board decision.
Etisalat
In July 2005, Pakistan sold 26% of its holding in PTCL to Etisalat at a price of $1.96 per share. About 1.326 billion shares were sold at a total price of $2.6 billion. At that time, Hafeez Shaikh was the privatisation minister.
But till date, Etisalat has not transferred $799.3 million and is holding 407.8 million shares without making due payments for the last 10 years, according to the receivables report. Since its privatisation in July 2005, PTCL has declared dividends regularly (except for two years) aggregating to Rs22 per share.
“The committee is of the view that we have a rightful claim of Rs8.97 billion being our portion of dividends (excluding mark-up thereon). This claim is over and above $799.3 million or Rs112 billion.
The committee also found a receivable of Rs137.7 million, which did not appear on radar.
Recovery methods
There are certain steps which can be taken concurrently with the litigation process, recommended the Receivable Committee.
The government should prohibit the defaulting buyers to dispose of the properties belonging to the entity or selling their interest in the unit by way of part disposal or leasing the units, according to the committee recommendation.
It also recommended “forwarding the names of defaulters to the State Bank of Pakistan for putting the defaulters and their other businesses where they are partners, directors or owners on the CIB list”.
This step will restrict the defaulters and their associates to avail banking facilities and thus will be forced to consider the payment seriously, it added.
“We can also refer the case to NAB as we did in case of Trust Investment Bank Ltd,” the report recommended.
Published in The Express Tribune, September 13th, 2020
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