GROWING PUBLIC PARTICIPATION IN ENERGY SECTOR

Benefits of divestment reaching to common man

By AMANULLAH BASHAR
Aug 16 - 22, 2004

After the historic response to the Initial Public Offering of the Pakistan Petroleum Limited (PPL) shares through stock market, the divestment of government shares in Kot Addu Power Project through stock exchange will be yet another attraction for the small investors in the capital market.

Actually, the policy of the government to broaden the private sector's stake in the public sector entities through divestment of the shares has proved a great success and even the critics who always love to remain on the left side have no reason to deny that fact that the benefits of the policy of privatization of government assets through stock market have started reaching down to the grass root level in the society.

The privatization of the government shares in the energy sector, which is the most vibrant sector of the economy, is the best example of the agenda of "privatization for the people."

Earlier the benefits of growth in the energy sector were exclusively enjoyed by the governments in the past, however, it is appreciable on the part of the economic managers who through their liberal policies have made it possible to develop a sense of participation in the national resources through privation of the government sector entities through stock market through a mechanism to ensure that the optimum benefits transferred to the small investors.

As a result of this policy the privatization of the government shares in the public sector organizations like SSGC, OGDC and recently offered PPL's shares which also set a land mark in the history of the share bazaar as well with the huge volume of capital formation to the tune of over Rs22 billion to the financial strength of the stock market in Pakistan.

Besides capital formation at a massive scale, it is interesting to note that the policy of privatization through capital market has generated a lot of interest and enthusiasm among the people for investment in the stock business at least in the urban areas of the country. It was quite natural because of the handsome reward on the investment in shares like PPL in which the overnight rate of return was almost 100 percent. The IPO of PPL shares were offered at a premium price of Rs55 per share and in the provisional trading in the PPL shares at the stock market was quoted at Rs108-09 indicating a 100 percent profit to the successful applicants of the PPL shares. A win win situation both for the government as well as the small investors from the private sector.

After successful launch of the PPL shares, now the Ministry of Privatization has announced to launch the IPO of Kot Addu sometimes in September. Kot Addu Power Project was the largest Independent Power Producing Project of which the majority shares were bought back by the government. Now under the policy of privatization the government is expanding the base of public participation in this prime power-generating project. It is expected that the response to the IPO of Kot Addu shares would even better than the IPOs offered so far because of the growing awareness among the people about the stock business.

Besides encouraging the public participation in the energy sector, the government on the other hand was also offering attractive incentives to the investors in the energy sector especially the oil and gas sector, which is of course the engine of economic growth in today's economy.

Recently, the government has allowed petroleum exploration and production companies to temporary import aircraft, drilling and seismic vessels, drilling bits and specialized vehicles without payment of customs duty and sales tax. This is however subject to the condition that the items should be re-exported as per laid down procedure. Earlier, the facility of temporary import was only available on the import of plant and machinery by the petroleum exploration companies. This facility would be extended to all petroleum sector companies, corporations and organizations including their contractors and sub-contractors and service companies shall be entitled to import machinery, equipments, helicopters, aircraft, drilling bits, drilling and seismic vessels, drilling rigs, specialized vehicles and vessels for construction, exploration and production of petroleum projects on import cum-export basis without payment of duties and taxes.

Pakistan has a plenty of untapped resources especially in the energy sector, however, it is unfortunate that the some of the vested interested creating law and order situation especially in the energy rich province of Balochistan. Those foreign oil exploration companies which have been granted concession blocks in Balochistan were finding it difficult to carry out their exploratory work as well as free movement in the area due to security risks created by the tribal leaders in that province.

The duty free import of aircraft and helicopter would greatly help to the professionals for the risk free movement in the area of the concession blocs. It is expected that the incentives may help producing much better results in the days to come. The surveys carried out indicate that Pakistan is an energy rich country and the huge unproved oil and gas reserves if allowed would change the course of economic history of this country.