Privatisation peril
ONE hopes our first major privatisation undertaking in years helps PIA’s rebound. The process had problems that must be avoided in future. PIA’s massive past losses made it critical to fix the airline. But then, it showed a profit of Rs26 billion in 2024 (after losing Rs100bn in 2023) due mainly to the removal of much of its debt from its books and a one-time tax deferral. So, we had time to adopt a strong process.
It is not clear whether the state’s minimum bid price of Rs100bn and the sale price of Rs135bn for 75 per cent shares are fair. A unit’s sale value depends not on its net assets value but on the net present value of expected future incomes from its assets over their lives. Airlines also gain value from landing rights at major airports. As the state hasn’t told us how it fixed the minimum price, doubts exist given its 2024 profits even before the gains from the end of bans on its best routes were fully realised or big operational changes were made.
More oddly, the buyer pays 7.5pc of even this likely low Rs135bn upfront yet gets 75pc shares. It will invest the rest in PIA over time. But as it comprises sums owed to the state, it should pay interest on these sums until it invests and the shares against it must surely be the state’s. To buy the other 25pc shares, it will pay the full Rs45bn with no discount. If it does so, it will pay only Rs55bn to get nearly 100pc shares valued in the auction at Rs180bn. But logically it should only get one-third and the state the rest.
This big free gift wasn’t stated in pre-bid official releases and only seemingly emerged after the sale. So, given the public loss and the opaque process, the view that the little we got for PIA is good enough is, in fact, not good enough. I haven’t seen such odd terms in any similar deal globally. Naughty tongues are wagging that we may have earned more for PIA had we sold it on OLX!
The best option for sick units can be decided via clear criteria.
If a now profitable PIA with its best routes back, much of its debt nixed and big heft in our airs was sold ‘aunay paunay’ (low-priced), it reflects less its status and more the shyness of our private sector to pay the full price and the PML-N’s urge to oblige them. Charges of selling cheap arose against it in the 1990s too. It’s the main factor but buyers too must take responsibility for doing such a flawed deal on a national asset. This is true for Fauji Fertiliser too, which, according to some, dropped out earlier as a bidder so that it could later join any winner via its influence. The questionable mandate of the PML-N and the broader institutional presence make the deal even more debatable for those who believe in democracy in both politics and business.
The buyers have no airline or global experience. Air India’s buyer Tata had birthed it in the 1930s and is a global giant. Can PIA’s buyers run the airline as a global entity? They have an overly free hand in staff lay-offs, fares and routes and big tax breaks. Yet, their head says PIA may run losses for years. But would it be due to PIA’s status, which has improved, or their non-expertise?
Our past privatisations were replete with troubling issues: poor sales prices and later performance, cartelisation; opaque sales, higher output prices and major staff lay-offs. But neoliberal business interests see privatisation as the only option for state units even though nearly 40pc of ours run profits. Businesses say the state has no business to be in business. But businesses have no business telling the state this. States have every business to be in businesses in which businesses can’t do business well, for example, in strategic or pro-poor sectors.
Given these persistent issues and the low managerial and financial heft of our private sector, it’s best to also consider other options such as autonomous professional boards and the top management, management hand-over only to the private sector, staff-owned units, liquidation and the public sale of shares. The best option for each sick unit can be decided via clearly defined criteria and an open process.
Privatisation may be a good option only for small units with no national strategic value.
Those who support the deal say that privatisation will fix PIA, open the door for putting right more state units and helping the overall economy. But given past trends, such rosy claims must be seen cautiously and we must also see whether other options may serve these aims better in the future.
The writer has a PhD degree in political economy from the University of California, Berkeley, and 25 years of grassroots to senior-level experiences across 50 countries.
Published in Dawn, January 6th, 2026