KARACHI, June 4: The postponement of PTCL sell-off is likely to cast a devastating impact on the stock market, but more so, on the credibility of government’s privatization programme. And then there is this reported 10-fold increase in capital value tax (CVT). The prime minister while talking to a news agency in Singapore had assured that the entire process of privatization of PTCL would be completed by the end of June. The privatization secretary had repeatedly mentioned June 10 as the date of bidding. And Privatization Minister Dr Hafiz Shaikh had held firm the date of June 10 for the bidding as close as on Thursday evening before the print and electronic media.

Whatever the reason, there is now the change of heart. Couldn’t the government foresee the problem until a day earlier? Or had somebody sold billions of rupees worth of stocks short in the market. Concerned people in Islamabad were said to be in a state of tremor, on Friday evening, trying to declare a new date for the PTCL bidding in a day of two. But that would not stop panic selling in the market on Monday, causing enormous losses to misguided investors. And who, much less the bidders would believe on anything that the government now says regarding its privatization schedule.

There is also the news from “official sources” and “informed sources”, declaring that the government would increase capital value tax on purchase of shares from 0.01 to 0.1 per cent in the forthcoming budget 2005-06.

KSE Chairman Yasin Lakhani told Dawn on Saturday that the government had proposed to raise Rs1.6 billion in taxation from all three stock exchanges during this financial year. “Against that target, the CBR had already collected almost twice that sum or Rs3 billion from the KSE alone (not including collections from Lahore and Islamabad exchanges) during the first 10 months up to April,” he said. “Was the government now seeking to realise tax revenue of as much as Rs36 billion next year, from the capital market?” asked the KSE chairman.

Most analysts thought that the CVT levy at 0.01 per cent had been settled with the government last year after prolonged negotiations. Under pressure to generate more revenue, the CBR might want to double the rate. “But the increase in levy by 10 times seems almost ridiculous,” said an analyst. It might merely be the case of putting the zero at the wrong place, but in doing so, the unsuspecting investors, who sell out their shareholdings on Monday, would suffer huge losses to the glee and gain of short sellers.