Pakistan International Airlines cannot operate without provision from national fund

Islamabad [Pakistan], July 23 (ANI): Pakistan International Airlines (PIA), the country’s main airline, has reached a point where it needs money from the national fund to operate for even one day. The government is thinking of bringing in specialists to draw a time-bound restructuring plan through shadow management in light of the total accumulated losses, which have exceeded PKR 600 billion, according to The News International.

“The financial position of the PIA is so bleak that it could not pay USD 50 million navigation charges to Saudi Arabia, so they at one point had barred the national flag carrier to continue its operation after June 30, 2023,” The News International quoted a top official in background discussions, and added that the PIA would be closed down on the day when the government stopped injecting money into the loss-making entity.

The official wondered how long a PIA that is operating at a loss would continue to operate and added that first and foremost, leaks needed to be sealed, a reorganisation plan needed to be created with deadlines, and the major functions needed to be gradually privatised.

“Now PIA has come up with a plan to include Boeing-777 in its fleet by securing a plane on a lease after which the number of planes will come at 11. However, the overall financial position of the PIA is so bleak that it is left with no other option but to make a time-bound restructuring plan and then divide the PIA into three to four companies,” The News International reported quoting top official sources on Saturday.

The International Monetary Fund (IMF) had claimed that the agriculture and construction sectors were undertaxed and could be fully brought into the tax net if the need arose to raise more money, but Ishaq Dar, the federal minister for finance and revenue, reiterated that there was no plan to do so.

The minister Saturday tweeted that there would be no more taxes on agriculture and construction sectors.

The management of PIA met with Ishaq Dar, the minister of finance, in Islamabad to discuss the future plan for reviving the national airline. The News International claimed that it was also brought up in the official meeting that the PIA could not be privatised under the scope of the most recent statute passed by parliament in 2016 because it had been transformed from a statutory organisation to corporatization.

There might be no need for additional revenue measures at present but if the need arises on the occasion of first or second reviews under the existing USD 3 billion Standby Arrangement (SBA) programme for nine months period, then undertaxed sectors like agriculture and construction would be considered as major revenue spinners in the future, The News International reported.

The World Bank has already done an analysis of different sectors of the economy, so agriculture and construction would be fully brought into the tax net in the future at the time of any additional revenue measures related to requirements to bridge the gap between revenues and expenditures.

Ironically, tax collection in Punjab and Sindh of the agriculture sector, which contributes over 22 per cent to the GDP growth, stood at a meagre amount of just PKR 4 billion per annum, The News International reported.

In the letter of Intent (LoI) dully signed by Ishaq Dar and SBP Governor Jamil Ahmed, which was tabled before the IMF’s Executive Board on the occasion of granting approval of USD 3 billion under the SBA programme, it is written that the FY24 budget, “Parliamentary approval of an FY24 budget in line with IMF staff agreement to meet programme targets (prior action for programme approval).

Khaqan Najeeb, former Ministry of Finance adviser, said it is not possible to raise additional revenue without targeting the undertaxed sectors, including agriculture and real estate.

Agriculture remains a main employer of the economy with more than 35 percent of the workforce and 22.7 percent of GDP. Estimated collection for FY23 across the country from agriculture income tax is less than PKR 4 billion with Punjab contributing PKR 2.85 billion and Sindh PKR 0.44 billion, The News International reported.

Provincial governments can significantly increase their tax-to-GDP through direct taxes like the agricultural income tax and urban immovable property tax.

He felt that a substantial raise in the flat tax rates in agriculture is required given the income per acre has increased over the years, with irrigated lands to be charged at a much higher rate. On the property, serious research is required to levy a capital gains tax on the marginal rate, and some kind of land tax along with correction in property valuations.

The domestic revenue mobilisation of Pakistan is currently heavily skewed towards the industrial sector — something we have to seriously reform, the economist said.