Govt defers privatization of two LNG power plants

LAHORE: The caretaker federal government has decided to stop privatization process for two Regasified Liquefied Natural Gas (RLNG) power plants, leaving it for the next government to decide their fate.

The move of the caretaker government against continuing the privatization of the two RLNG-run power plants may not augur well for an agreement reached with the International Monetary Fund under a loan programme. Pakistan has agreed with the international lender it would complete the privatization process of both Haveli Bahadur Shah and Baloki power plants.

The decision comes in the wake of ongoing discussions with the International Monetary Fund on the privatization of state-owned enterprises (SOEs), including power plants. The IMF wants to complete divestment of these plants with the aim to generate funds for the cash-starved government. As per an understanding with the IMF, the process of equity sale of two RLNG power plants is being initiated afresh, with proceeds to be channeled to debt reduction and poverty programs.

However, as the caretaker setup opted to stay away from the privatization process, it would now be the responsibility of the next elected government to decide the fate of these power plants. The plan to sell these power plants has been lingering for several years for one reason or the other. Against the backdrop of Covid-19 and economic uncertainty, the process of privatization could not be finalized by end-Financial Year 2020 as previously planned. Then it was aimed to conclude the process by end-February Financial Year 2022.

It may be noted that the IMF has persistently advocated privatization of SOEs as part of Pakistan’s economic reforms to generate funds. However, as the caretaker government opted out of the privatization process, the move may adversely affect progress on the upcoming review of a $3 billion bailout programme agreed with the government.