ISLAMABAD - The parliamentary committee recommended to refer failed attempt to privatise the Heavy Electrical Complex (HEC) case to NAB or FIA, as the Privatization Commission is responsible for wilful and criminal negligence in the privatization of the HEC.

The government last year had cancelled its privatization deal for HEC after the Rs225 million cheque deposited by Cargill Holdings Limited was dishonoured. The Senate Standing Committee on Finance had shown reservations over the privatization deal. The Committee constituted a subcommittee in order to determine the reasons that led to the failed attempt to privatize HEC.

The committee in its report, which is finalized after thorough discussions, observed that Privatization Commission (PC) is responsible of wilful and criminal negligence in the privatization of the HEC. The committee in its report strongly recommended referring the matter to NAB/FIA to investigate into the HEC transaction to determine whether the Chairman/Secretary, the top management and the consultants were involved in corruption and embezzlement or not.

The report also suggested that top management including the Secretary and the current team of consultant should be changed in order to avoid such criminal negligence and lackluster approach in further privatization of strategic assets like Steel Mill and PIA. “The Secretary and the top management of the PC were evasive and dodgy throughout the hearings and were knowingly letting the deal happens even after having idea that the bidder is bogus and fake,” according to the finding of the report.

The parliamentary committee recommended that Privatization Commission must be told not to rehire same financial/legal consultants for the different privatization deals again and again. “The PC must get its house in order and must document the transaction and other meetings minute properly as per the company law requirements”, it added in the report.

The report also suggested that the Senate Finance Committee needs to be formally engaged once government decide to privatize any entity, the committee should decide whether it’s in public interest to privatize particular entity or not, if entity is profit making then Government must abstain from privatizing such entities and must not deliberately create conditions which turn any profit making entity into loss to create justification for privatization.

According to the report, the transaction committee, in its January 27 2015 meeting, despite knowing of the fact that Cargill Holding was incorporated on 10th December 2014 with no prior background in relevant industry approved them as qualified bidder without conducting proper due diligence. The Privatization Commission totally over looked the fact that the bidder nominal share capital of the company is Kenya Shilling one hundred thousand, (approx. 1000 US $ only) into 1000 share. This is the actual standing of the company on public markets which has been considered for a multi-billion rupees transaction of HEC.

It further revealed that the PC Board in its meeting on 04 February 2015 stamped the recommendation of Transaction Committee as it is and recommended Cargill Holding as the qualified bidder for the HEC privatization despite knowing that company has no profile no financial standing  and has recently been incorporated.

The PC Board on its 11 March 2015 meeting authorizes Chairman and the Secretary of the Commission to negotiate with the bidder about the deal structure. The chairman and the Secretary both decided to offer the company for 250 million for cash payment and retains all bank liabilities of HEC and all its employees. The negotiated offer of this deal raised quite eyebrows in media and members of the Senate Committee were also astounded on the proposed deal contours. The Senate committee was not convinced about how the liabilities were adjusted by the valuor and raised questions as how current and future liabilities were adjusted and why Bank of Khyber wasn't part of deal despite of the fact they owed Rs 435 million in liabilities. The Committee asked the Commission to produce any agreement which stipulates that the bidder will not reclaim the income tax and Sales tax rebate to which none were produced by the Privatization Commission.  This amount as shown as Tax refund is 190 million and while Sales Tax Refund stands at Rs 191 million meaning there by that a total of Rs. 381 million stands as tax credit.

However, the astonishing and a serious  concern  remains that while  declaring  the total  sale proceed of the project it is  stated that Rs. 435 million is to be paid to  BOK and is shown as a liability of  the Bank which is a current  liability against which a current asset of 882 million is available in the  Company (of which 416 million is stock in trade), which means that  even in this case when the bank liability is  settled, net of 480 million still available  in the Company as current asset which  would have been transferred to the buyer free of cost. This fact has put the complete valuation process conducted by Delloitte and negotiated offer to the bidder by the Privatization commission in doubt.

The chairman and the Secretary couldn't discover that the company is fake with wrong registration scheme, this is of concern for the Senate Finance Committee as how is it possible that both of them were so clueless about the whole process. The Secretary was always repeating same point that now they have the initial money of the bidder with them who lost it due to the Court order, but question is that why things reached to this point and only after once media and Senate Committee highlighted the matter, and what about high fees paid to consultants and the bad reputations caused to Pakistan in international markets.