The government has decided to sell Precision Engineering Complex (PEC), a business unit of Pakistan International Airlines (PIA), to the Pakistan Air Force (PAF) for Rs 6.5 billion. The deal includes Rs 2.5 billion in cash and Rs 4 billion in employee-related liabilities. The Express Tribune Quoting government officials.
A ministerial committee has already approved the transfer of the precision engineering complex to the PAF at a total price of Rs 6.5 billion. A formal summary is now being prepared for approval by the Federal Cabinet.
The structure of the deal was approved by a four-member ministerial committee headed by Finance Minister Mohammad Aurangzeb, including the defense, aviation and privatization ministers.
A subcommittee evaluated the assets and liabilities of the General Electricity Corporation to finalize the deal. The PAF will establish a special purpose mechanism to manage the operations of the Public Electricity Corporation and ensure financial stability.
The Precision Engineering Complex, which manufactures high-precision parts for the aerospace and other industries, has already been separated from PIA’s core operations. They are among the non-core assets transferred to PIA Holdings, which also carries liabilities worth Rs 623 billion on the national carrier.
As of December last year, PEC’s total assets were worth Rs1.2 billion, while its liabilities were Rs2.9 billion, resulting in negative net equity of Rs1.73 billion.
The sale price of Rs 6.5 billion, which was determined under the discounted cash flow method, includes land, infrastructure, machinery, equipment and human resources.
Under the agreement, the PAF will pay Rs2.5 billion in cash over five years and assume Rs3 billion of pension and provident fund liabilities for 259 retired personnel over the next decade.
An additional Rs 1.1 billion from personnel liabilities of 251 existing employees will also be transferred to the PAF. Employee contracts will remain unchanged, with wages, allowances, medical services and retirement benefits maintained.
The government had previously attempted to privatize PIA last October, but failed after five of the six shortlisted bidders withdrew. The only remaining bidder, a real estate developer, offered Rs 10 billion for a 60% stake against a minimum reserve price of Rs 85.03 billion. Disagreements over tax liabilities and interim financing led to the deal falling through.
Despite these challenges, the government secured a cash deal worth Rs2.5 billion for PEC, which includes Rs199 million in property and equipment, Rs742 million in trade receivables, and Rs93 million in cash deposits. Liabilities include Rs 1.1 billion in employee liabilities and Rs 1.8 billion in trade payables.
The sale is seen as part of a broader effort to restructure PIA by divesting its non-core assets and addressing its financial challenges.