Finance Ministry gave its comments on a summary of Aviation Division in which the latter sought GoP guarantee for Rs 16 billion to be raised from commercial banks. In February 2017, with the approval of ECC the Government of Pakistan enhanced commercial borrowing guarantee limit of PIAC from Rs 151 billion to Rs 161.5 billion to meet their financing and operational requirements.
Aviation Division/PIAC had requested for further increase in the guarantee limit by an amount of Rs 16 billion ie from existing limit of Rs 161.5 billion to Rs 177.5 billion as per following itemized expenditure:- (i) mark up payments - Rs 6.1 billion;(ii) engineering project & ground support equipment - Rs 3.0 billion and ;(iii) construction at NIIAP project site (CFY 2017-18) - Rs 6.9 billion.
Finance Division examined the proposal and agreed to provide GoP guarantee up to a rationalized limit of Rs 13.585 billion as per following break up, subject to the approval of ECC of the Cabinet:- (i) mark up payments (GoP guarantee loans) - Rs 5.238 billion;(ii) engineering project - Rs 2.0 billion;(iii) ground support equipment - Rs 1.0 billion; and (iv) construction at NIIAP project site (CFY 2017-18) - Rs 5.347 billion, adding up to a total of Rs 13.585 billion.
Finance Division further argues that PIAC may formulate a comprehensive debt retirement plan on a long-term basis rather than seeking more loans to pay off the existing ones, since continuous borrowing is not only unsustainable but may even affect PIA as a going concern.
According to sources, PIACL is going through a difficult period due to continuous losses and severe cash flow crisis is hampering operations. Various suppliers have stopped supplies to PIA due to non-payment and lessors are giving default notices. The situation needs immediate redressal, otherwise, it can result in disruption of operations and services.
PIACL has prepared its funds requirements for the period July - December 2017 which is as follows: (i) GoP guarantee loan installments - Rs 17.017 billion;(ii) non-GoP guarantee loan installments - Rs 7.132 billion and ;(iii) mark up payments - Rs 6.113 billion. The total amount is Rs 30.262 billion.
Aviation Division maintains that PIACL would endeavor to pay the non-GoP guaranteed principal installments totaling Rs 7.132 billion from its own resources. The GoP guaranteed principal installments totaling Rs 17.017 billion would be settled through roll-over of guarantees with the assistance of Ministry of Finance. However, PIACL would need support for the mark up payments totaling Rs 6.113 billion.
The status of GoP guarantee limit assigned by ECC to PIACL as on 30th April, 2017 is as follows: (i) guarantee limit assigned by ECC - Rs 161.50 billion; and (ii) GoP guarantees outstanding - Rs 161.50 billion.
During a recent meeting with Prime Minister of Pakistan, PIACL requested support of the government towards following capital expenditure:- (i) engineering projects - Rs 2.00 billion and ;(ii) ground support equipment - Rs 1.00 billion.
Furthermore, PIACL wants to construct certain operational facilities at New Islamabad International Airport (NIIAP) project site for which space has been allocated by CAA. These facilities include construction of a Flight Kitchen, Wide Body Aircraft maintenance/ repair Hangar and Technical Ground Support equipment area/ handling offices which besides savings for PIA would also generate additional revenue, especially in the backdrop of CPEC, market growth/ demand is anticipated. The total estimated cost of the civil, electrical and layout etc of the PIACL facilities is about PKR 6.90 billion.
PIACL is formulating a comprehensive business plan to be presented to the Federal Cabinet in the first week of November 2017. The debt retirement plan is an essential component of the business plan to revive PIACL on a sustainable basis.
Copyright Business Recorder, 2017