Pakistan International Airlines-Investment Limited, company owned by PIA is accused of obtaining $130 million at interest rate of 6.5% while the prevailing interest rates were around 1.8% to 2.2%, a complaint sent by Transparency International to Managing Director PIA reveals.
This difference in mark-up may cause Rs1 billion loss to the PIA annually, says the complaint. The failure of the PIA-L management to anticipate the expiry of the loan date and arrange for a better option in time is also being questioned.
PIA has also been asked to get the accounts of PIA-IL audited by the Auditor General of Pakistan because its accounts have not been audited by the government. Attempts to contact PIA spokesman were made but he was not available for comments.
First the spokesman of PIA, Syed Sultan Hassan, was not available during the Muharram holidays. ‘The News’ then sent an email to the PIA spokesman and it was assured by the spokesman that it would be replied to the next day, but despite waiting for PIA’s version for three days, no response was forthcoming.
PIA spokesman, however communicated only one sentence: PIA has signed a Memorandum of Understanding (MoU) with the Transparency International and all its tenders were being vetted by the TI-P.
The actual questions were never replied to. The TIP complaint sent to MD PIA says: ‘PIA-Investment Limited (PIA-IL) which owns two hotels M/s Roosevelt (USA) and M/s Scribe (France) worth $800 million was incorporated on 10 September 1977 in Sharjah, UAE, and since 2006 it is a 100% owned subsidiary of Pakistan International Airlines, but still registered in UAE and not in Pakistan. This has caused millions of dollars loss because of holding Board meetings outside Pakistan.
That PIA-IL is not following Ministry of Finance and PPRA Rules, though as 100% PIA subsidiary, it is a Government of Pakistan owned company.
That it is required that PIA Investment Limited must be brought under government audit and all its associated companies viz M/s Roosevelt Hotel (USA) and Scribe Hotel (France) which is being handled by few individuals disregarding financial rules of GoP, and being run by a board of 5 individuals whose input is nothing, but foreign visit are made at PIA expense.
That there have been numerous financial irregularities that have come to surface but the management of PIA-IL have always wriggled out, and Auditor General Pakistan has never audited its accounts.
That despite the fact that PIA Investment limited is a profit making entity yet in August 2011 it borrowed US$130 million from a financial institution at exorbitant interest rate of approximately over 6.5% against the registered mortgage of Hotel Roosevelt which is almost a cash collateral, whereas the ongoing long term interest rates were around 1.8% to 2.2% (LIBOR was only about 1%).
That the Board of PIA-IL in which two members MD and DMD PIA were nominated in August 2011, who had no financial background, approved the loan within few week of their nomination.
That PIA-IL cannot take loan without the approval of Ministry of Finance, and even PIA takes approval of its loans from the Ministry of Finance.
That some years back, when the interest rates were high PIA-IL also borrowed from the same financial institution at the rate of approximately 2%.
That Pakistan International Airlines also borrowed US$125 million in the same period at 0.5% lesser interest, but with the approval of Ministry of Finance.
It is astonishing that when PIA was not exempted from the approval of Ministry of Finance, while borrowing, then how come that PIA-IL did not follow the established rules of business.
That in these two loans, PIA may suffer loss of about 4%, which is about Rs 1 billion per annum.
That PIA-IL operations is a role model of corruption and an eye opener of continuing glaring violations of rules in all financial matters, as well as the PPRA rules while entering into contracts of millions of dollars without open tendering, of renovations, plant/equipment replacements, outsourcing operations in these hotels etc.’
Transparency has asked MD PIA to examine the complaint and if the allegations are found to be true, some action should be taken to immediately get the PIA-IL and PIA accounts audited by the Auditor General Pakistan, PIA-Investment Limited registered office be shifted to Pakistan, and administrative action taken against those who are responsible for the loss of billions of rupees to the national exchequer.