THE poor response to the government’s bid to sell three redundant thermal power plants indicates the investors’ lack of confidence in its privatisation policies. It also signals their reservations about the heavy taxes they are required to pay on top of the reserve price. That the prospective investors had already raised the issue of sales and income tax on what they see as ‘scrap’ meant that they had little appetite for the offerings without being given significant tax concessions. They also sought the item-wise disclosure of the reserve price — a legitimate demand which the auction team rejected. Hence, it is little wonder the Jamshoro plant attracted only one bidder, while no one made an offer for the other two plants in Muzaffargarh and Faisalabad.

Now the authorities have rescheduled the auction for May 30. Along with these Gencos, they plan to put on offer other scrapped plants in Quetta and Guddu to ensure greater investor participation with ‘improved’ terms of sale. While it is not clear what the latter would be, it can be assumed that the investors would get substantial tax breaks to make the deals attractive. This is what the authorities should have considered before they advertised what proved to be a failed auction. They must realise that every failed privatisation attempt weakens the government’s position and leads to a change in the terms of sale, while strengthening the bargaining position of the investors in future auctions. We have seen this happen in the case of PIA when it was put up for sale last year. The authorities’ expectation that given the age and condition of the redundant plants, their auction would take place in multiple stages does not hold water. It only reveals that they had not planned the sale carefully. It is hoped that, before they make any future attempt to auction outdated power assets, they will consider all factors that have so far kept investors away.

Published in Dawn, May 21st, 2025