ISLAMABAD: The Senate Finance Committee was stunned over the disclosure about non-inclusion of sales tax refund of Rs 191 million in the total value of Heavy Electrical Complex (HEC).
This amount is pending with the Federal Board of Revenue (FBR) over the year as the HEC has been paying sales tax on the sale and export of its products since long.
This amount has not been shown either as a liability or an asset, HEC Managing Director Muhammad Ali Khan disclosed before the Senate Finance Committee of the Senate. The sub-committee of the finance met to overview the privatization process being carried out by the government for the HEC.
The Heavy Electrical Complex (HEC) was established to produce power transformers required for the village electrification programme through expansion of existing electricity transmission and distribution network. The complex was setup with the technical and financial assistance of China and plant machinery had been procured from various Chinese and European sources.
The HEC chief observed that the complex was a strategic asset as well as its strategic location required that it should not be privatized because it was situated close to the proposed China-Pakistan Economic Corridor (CPEC).
Similarly, it is the lone electric transformer manufacturing unit in the country and if its operations are closed then DISCOs will have to bear direct loss of Rs 200 billion due to import of transformers because presently Chinese transformers are 30-40 percent costlier than the transformers manufactured by the HEC.
Furthermore, HEC has been turned into a profit making entity and it has deposited Rs 25 million profit into the national kitty in the first quarter of current fiscal year and it will earn a profit of Rs 200 million by the end of current financial year. Therefore, privatization of HEC is not in the national interest, he said.
Secretary Privatization Commission Sardar Ahmad Nawaz Sukhera tried to brief the committee about the reasons placing HEC on list of the proposed entities for the privatization, however, committee termed his briefing prepared only to justify the privatization of the HEC.
Therefore, committee members sought meeting minutes prepared at the time of placing this entity in the list of proposed entities for the privatization and decided to invite the parent ministry to brief the committee on the said issue.
It is pertinent to note here that four bids had been made for the privatization of HEC. It was presented for privatization for the first time in 1997, however, in March this year, the Cabinet Committee on Privatisation accepted Cargill Holdings Limited Company’s bid for acquisition of HEC at a meagre price of Rs250 million.
It was a negotiated sale, as the board of Privatisation Commission had originally set the minimum price at Rs 500 million. Deloitte Pakistan, the financial advisor for the transaction, had valued the company in the range of Rs 1.248 billion and Rs1.475 billion.
However, in June this year, government cancelled privatization deal for Heavy Electrical Complex (HEC) after the Rs225-million cheque deposited by Cargill Holdings Limited was dishonored. The government kept the Rs 25 million that the buyer had deposited as earnest money as a penalty.
