As the opposition continues to voice its reservations against the ongoing transaction that will see the government sell 10% of its stake in the Oil and Gas Development Company Limited (OGDCL), the administration has moved to pacify the concerns.
The opposition, which includes Pakistan Peoples Party (PPP) and OGDCL employees, has started disrupting gas supplies, causing more concern to the government and investors alike.
Privatisation Commission (PC) Chairman Mohammad Zubair said the government has offered an olive branch to the opposition.
“I have requested the political leadership to engage with the PPP. and the government is also ready to give more incentives to the employees,” said Zubair, while addressing a press conference held a day after the finalisation of ODGCL stake’s floor price. The PC chairman was left to face a barrage of questions over the ill-timed capital market transaction.
The government, which has faced several obstacles in its attempt to go ahead with the transaction, is already struggling to come up with a credible strategy to justify the poor timing that will reduce its earnings by at least Rs15 billion.
Zubair admitted that the government was undertaking the transaction during difficult times.
He said that out of the 322.4 million shares that have been offered to investors, which come to 7.5% of the total shares of the company, about four million will be sold to employees at reduced rates during the second phase. “The government is ready to sit down with the company’s union and discuss more incentives. Some of the concerns of the employees are genuine.”
He said the government would engage the PPP and is ready to discuss the matter further with Senator Raza Rabbani, who is spearheading the anti-privatisation drive.
“Privatisation is also on the PPP’s agenda and the party carried out as many as 27 privatisation transactions during its second stint in power (1993-1996),” Zubair reminded.
The book-building process to sell 7.5% shares of the company began on Wednesday and would culminate at 1 am on Saturday morning, according to Pakistan time. Once the book building finishes, the cabinet committee on privatisation will approve a cut price at which the shares will be sold to the bidders.
The first phase to sell 311 million shares to international and domestic institutional investors at a floor price of just Rs216 per share began on Wednesday. The government has given a 6% discount on the previous day trading of the OGDCL shares at the Karachi Stock Exchange. The discount would alone cause about Rs5 billion losses on last day’s trading.
Zubair defended the decision of providing the discount and said that the government of General Pervez Musharraf had also carried an OGDCL transaction in 2006 and offered a 9.6% discount.
The second phase will begin after a gap of four to six weeks in which out of the remaining 11 million shares, one-third will be offered to OGDCL employees.
The government has initially anticipated earnings of 0 million by selling 322.4 million shares of the company, said Zubair. “Now we are expecting total earnings to be less than 0 million,” he added.
Zubair said due to various reasons, the government would receive a lower share price of between Rs40 to Rs45 — a staggering figure that would cause Rs15-billion loss to the exchequer. But he insisted that the country will be a net gainer, as reduction in oil prices would result in billion savings on the import of oil.
The International Monetary Fund has linked the approval of .1 billion next loan tranche with divestment of OGDCL’s shares. “As a sovereign country, we are committed to our obligations under the IMF programme,” said Zubair.
He said that the delay caused by a stay order granted by the Peshawar High Court on the petition of Pakistan Tehreek-e-Insaf led provincial government and the sudden fall in oil prices in the international market reduced the government’s earnings.
Published in The Express Tribune, November 8th, 2014.
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