ISLAMABAD, Feb 26: Eighteen days before the end of its term, the government approved on Tuesday a record Rs100 billion bailout package for the ever-bleeding Pakistan International Airlines.

A meeting of the Economic Coordination Committee of the cabinet, its second in four days, also decided to increase commission for dealers and margins on sale of high-speed diesel.

Finance Minister Saleem H. Mandviwalla presided over the meeting.

The committee approved an “interim business plan” presented by the PIA management for five years.

The bailout package will allow the Ministry of Finance to issue fresh guarantees of Rs49 billion during the current year to help the airline cope with its liquidity problems.

The committee decided to ask the Ministry of Defence to arrange payment of $46 million by the Ministry of Finance with or without government guarantees to enable PIA to acquire five narrow-bodied aircraft to replace its ageing fleet.

It approved a proposal to extend loans and guarantees of Rs33.5bn till June this year and allowed the airline to borrow Rs13.5bn from the National Bank of Pakistan against a letter of comfort to be subsequently replaced by federal government guarantees.

The committee stated that the measures would help PIA to achieve fuel efficiency through fleet modernisation, optimum fleet deployment on network, introduction of additional frequencies on high-demand high-yield routes, enhance revenue and increase its market share, separate the core airline business activities from non-core activities and restructure its liabilities to reduce its financial cost.

Diesel price

The ECC approved an increase in profit margins of oil marketing companies and petroleum dealers by 10 paisa per litre on high-speed diesel on a summary moved by the Ministry of Petroleum. The decision will increase HSD price by Rs20 per litre from March 1 when rates of petroleum products are likely to be raised under the monthly price revision system.

Through another summary, the ministry complained against refusal by the Oil and Gas Regulatory Authority (Ogra) to allow a 14 paisa per unit allowance to Pak-Arab Refinery Limited despite ECC’s expressed desire. Ogra has informed the government that the Supreme Court has directed against passing on imprudent costs to consumers. It said if the government wanted to compensate Parco refinery on account of transportation charges it should do so directly from the federal budget.

The ECC directed Ogra to continue to implement its decision of August 16, 2011, and reimburse the price difference to Parco through inland freight equalisation margin as per previous practice.

On yet another summary from the Ministry of Petroleum, the ECC approved a revised price computation formula for HSD due to change of benchmark price from 0.1 per cent to 0.05 per cent sulphur content (Euro-II) which would remain in force till June 30 next year.

The committee banned marketing of HSD with sulphur content of more than 0.05 per cent.

On a request of the ministry, the ECC allowed allocation of 20 MMCFD (million cubic feet per day) of gas from new sources to 100MW power plant of the Sindh government at Nooriabad Industrial Estate.

It directed that the said allocation by the SSGC should be placed at the disposal of the Ministry of Water and Power till the plant became operational.