Sick PIA to get Rs13 billion bailout packagePakistan
ISLAMABAD: The government is set to allow another bailout package worth Rs13 billion to the embattled national flag carrier, and will allocate around Rs230bn for the procurement of more than seven million tonnes of wheat during the current season.
Sources told Dawn that a meeting of the Economic Coordination Committee (ECC) of the cabinet being called this week will also approve special honoraria for officers working on Sustainable Development Goals (SDGs), besides allowing four-month salaries to employees of the fledgling Pakistan Steel Mills (PSM).
In addition, the ECC is expected to approve income tax exemptions on a few national savings instruments. Sources said the relevant ministries and members had been notified of the ECC meeting, which will be held soon after Prime Minister Shahid Khaqan Abbasi returns from London.
Pakistan International Airlines (PIA) is a chronic recipient of bailouts in the form of capital injections from the budget, or commercial loans from banks against the government’s sovereign guarantees due to its continuous losses.
Its current liabilities are estimated at over Rs300 billion and most of them have contingent ramifications on the federal budget.
Sources said that the Rs13bn bailout package was ready for approval to roll over the airline’s existing maturing loans and liabilities. It has been in continuous default on payments to fuel suppliers, including the state-run Pakistan State Oil (PSO).
ECC set to approve Rs230bn for wheat procurement, tax exemptions on savings certificates
Earlier this year, the government increased its guarantee limit for PIA by Rs10.5bn to Rs161.5bn to address the airline’s immediate challenges. The PIA management had pleaded at the time that its fiscal challenges had multiplied after a plane crash (PK-661), though it had been operating with a liquidity crisis for several years.
Continuous cash injections over the past three years, it said, had improved the number of PIA planes and efficiency, but revenue could not pick up due to a reverse challenge — surplus capacity and low yields.
Sources said that while the government had prepared a procurement plan for more than seven million tonnes of wheat in the public sector at an estimated cost of Rs230bn, it was in a fix over the fixing of a wheat support price, or a minimum guaranteed price for the next year.
An official said the federal and provincial governments had agreed to keep the wheat support price unchanged at Rs1,300 per 40 kg for the next season, but there was still pressure from rural constituencies for an increase. An increase in the support price is generally directly proportional to a price hike.
The ECC is also expected to exempt profits of National Savings’ Pensioners Benefit Account (PBA), Behbood Savings Certificates (BSC) and Behbood Savings Accounts from the levy of 10pc income tax.
These National Savings Scheme (NSS) products cater to pensioners and widows and are exempted from withholding tax. The summary has been moved by the revenue division on the instructions of Finance Minister Ishaq Dar to remove the anomaly in the tax regime which resulted in the taxation of yield on these products.
The impact on taxation of these schemes was caused by erroneous legal changes, introduced in the Finance Act in June this year.
The ECC will also take up four summaries from the petroleum division, relating to commercial production of certain small gas fields and their allocations to various types of consumers.
The meeting will take up the payment of four months’ salaries to the PSM employees. The mills have been closed since June 2015 and employees have remained unpaid since May this year. They will be given Rs1.52 billion for four months at the rate of Rs378 million per month.
Published in Dawn, October 30th, 2017