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Govt likely to put on hold PSO privatisation

ISLAMABAD — Pakistan government is likely to put on hold at least till the new government takes over the privatisation of Pakistan State Oil (PSO) after having received serious objections raised by the armed forces of Pakistan.

Informed sources said that the authorities of all three forces have vehemently opposed PSO transaction and asked the government to review the decision.

The government has also been informed that security concerns of the armed forces have become all the more valid especially in view of the reported increased Indian ingress into Pakistan's national communication system as a result of PTCL privatisation. Similar influence from outside on Pakistan's POL supply and storage mechanism will create more problems for the country and its war potential, said a government source quoting military authorities as saying.

The latest opposition against the sale of strategic assets is perhaps the biggest challenge to the government's privatisation strategy after the failed sale of Pakistan Steel Mills that was cancelled by the Supreme Court of Pakistan early last year on allegations of impropriety and indecent haste.

Sources said that a recent meeting of the Joint Logistic Planning Committee (JLPC) specifically held detailed deliberations on the impact of proposed sale of PSO on armed forces' on the recommendations of the services headquarter.

The committee after the deliberations concluded that PSO should not be privatised due to a number of reasons including PSOs reluctance even before privatisation to renew its existing contracts, which in private hands would be more difficult to be handled. The committee also reminded the government that a lot of security problems have already started to arise due to the privatisation of Pakistan Telecommunications Company Limited (PTCL).

Subsequently, the Joint Staff Headquarters, with the approval of the Chairman of Joint Chief of Staff Committee (JCSC) has strongly recommended that (the) decision to privatise PSO may be reviewed.

The sources said the armed forces believed that being a strategic asset, privatised PSO was not in the interest of armed forces as well as the country. Secondly, with improved economic and financial health of the country, the government was no more under such financial constraints as it was when the decision for the privatisation of PSO was taken a few years back that could warrant sale of such a strategic asset.

The joint staff headquarters have also informed the government that embarkation units of army and air force have started facing security and administrative problems due to privatisation of few berths at the port. The problem has been further aggravated as Karachi Port Trust refused to take any responsibility in this regard.

Moreover, PSO even before its privatisation has refused to renew the contract of defueling Pakistan Navy ships on as required basis and it was feared that PSO after privatisation would be more likely to default on its obligations despite guarantees provided in the agreement.

Sources said the armed forces have been opposed to the very idea of selling the country's largest oil supplier from the very beginning but were prevailed upon after October 1999 on the assurance that its supplies would remain uninterrupted even in case of eventualities and its storage facilities would be kept secure through fool proof arrangements.

The Supreme Court of Pakistan had in August this year put on hold the bidding as well as sale process of PSO with the observation that it would look into the entire transaction to see if at all it was in the national interest.

Separately, the standing committees of the national assembly on petroleum and natural resources in September had also opposed the privatisation of PSO from the perspective of national security and public interest. The NA standing committee on Defence had also opposed the PSO privatisation.

The government on the other hand has been vigorously pursuing the privatisation of PSO to raise up to $1.5 billion to partially check increased current account deficit. The bidding date for the transactions was cancelled at the eleventh hour in May last year by the government on the ground that some bidders wanted more time to consolidate consortium partners.

The company has announced substantial increase in its profit in the first quarter on the back of rising inventory gains as international prices rose and a new-found market in Balochistan as a result of reduction in smuggling of Iranian petrol.