The expense concerns a failed bid to privatise the Heavy Electrical Complex (HEC), a unit of Pakistan’s State Engineering Corporation.
By Aoun Hussain
ISLAMABAD: The government of Prime Minister Shehbaz Sharif has decided to pick up over PKR 20 million in expenses arising out of a failed bid to privatise the Heavy Electrical Complex (HEC), Independent Pakistan can report.
The money, to be booked as a grant to HEC, would be used to pay off accumulated mark-up to the Bank Khyber, accrued after a bid to privatise the state-owned engineering behemoth fell through apparently when the successful bidder got cold feet.
A unit of Pakistan’s State Engineering Corporation, HEC says it has been “setup in technical collaboration with manufacturers of international repute, to manufacture electrical equipment mainly used in 132KV and 66KV sub-stations and grid-stations of high voltage power supply systems”.
It was placed on the active privatisation list by the government of former Prime Minister Imran Khan. His cabinet made the decision on 10 March 2020 due to HEC’s inefficient operations and huge financial liabilities.
The Privatization Commission (PC) held bidding for HEC’s privatisation on February 21, 2022. IMS Engineering (Pvt.) Ltd., emerged as the highest bidder which was approved by the Federal Cabinet.
However, the Power Distribution Companies (DISCOs) including FESCO, GEPCO, and LESCO encashed their bank guarantees due to non-execution of contracts.
The bank subsequently reported the default to Electronic Credit Information Bureau (e-C113) on February 28, 2022.
A meeting was recently held at Privatization Commission (PC) to discuss and resolve the issue and it was agreed in the meeting that payment of mark-up until change of control (transfer of shares to the successful bidder) was the responsibility of HEC.
Accordingly, a summary for the provision of funds for paying mark-up of PKR 23.3 million was approved by the ECC of the Cabinet and ratified by the Cabinet.
The Finance Division (FD), however, did not release the funds and raised a query as to the nature of the funding: Would it be a grant or a loan?
An identical observation regarding the already released funds amounting to PKR 96.87 million was also made by FD stating that the earlier summary approved by the ECC of the Cabinet did not specify if it was to be a grant or a loan.
The Ministry of Industries submitted its viewpoint and subsequently a meeting was held at FD which was attended by the representatives of various ministries. To resolve the matter, the FD suggested moving another summary for the ECC of the Cabinet for seeking explicit approval of a grant of PKR. 20.085 million to be released by FD.
The matter is now pending before the ECC of the Cabinet for approval of the amount of PKR. 20.085 million as grant for the HEC.
As there is no budgetary provision for this amount in the current fiscal year’s budget, the amount may be allocated in the demand of Ministry of Industries and Production through Technical Supplementary Grant.
The funds amounting to PKR. 96.873 million, already released by Finance Division as loan to HEC in pursuance of the ECC’s decision dated 22nd November, 2021 may also be converted into a grant.
The HEC works is located in Hattar Industrial Estate in the Province of Khyber Pakhtunkhwa, some 66 km from the country’s capital, Islamabad. It covers about 33 hectares of land, of which 25,500 square metres are covered by the factory buildings.
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