On Thursday, the Federal Board of Revenue (FBR) rescinded its decision to freeze Pakistan International Airlines’ (PIA) bank accounts. However, the FBR clarified that this reversal did not hinder its pursuit of recovery proceedings, underscoring a challenging financial predicament for the national carrier.
PIA has been grappling with a persistent financial crisis, exacerbated by the FBR’s recent move to freeze 28 of its accounts just a day prior. The Pakistan State Oil (PSO) had also issued a stern warning, threatening to suspend oil supplies to the airline if outstanding dues were not settled.
These developments unfolded amidst a visit from the European Union’s Aviation Safety Agency (EASA) team, tasked with evaluating flight safety concerns in Pakistan. EASA had previously restricted PIA from operating flights to Europe following a plane crash in Karachi in May 2020 and revelations by former aviation minister Ghulam Sarwar Khan about questionable qualifications of Pakistani pilots.
The FBR’s deputy commissioner for Inland Revenue conveyed, “This office has been directed to withdraw the notice mentioned above and to de-attach the bank accounts of the subject taxpayer with immediate effect.”
Despite this, the board emphasized that removing the attachment did not preclude the pursuit of “recovery proceedings” under Section 14(3) of the Federal Excise Act, 2005, pertaining to unpaid or erroneously refunded duty. PIA spokesperson Abdullah Khan confirmed the FBR’s directive to unfreeze accounts nationwide, highlighting ongoing communication between the national carrier and FBR’s large tax unit to address the underlying issues.
PIA’s financial challenges have escalated with substantial losses, prompting the government to announce privatization plans and the outsourcing of airport operations. Last month, PSO halted fuel supplies due to unpaid dues, resulting in the cancellation of over 500 flights. Although operations resumed, the government has intensified decisions regarding PIA’s future.
Furthermore, the Cabinet’s Economic Coordination Committee (ECC) rejected approval for an emergency supplementary grant of Rs7.3 billion, as requested by the Aviation Ministry.
Reports from Bloomberg indicate that PIA’s liabilities amount to a staggering Rs743 billion (approximately $2.5 billion), surpassing its total assets by five times. With only 19 out of 34 aircraft operational, and losses reaching Rs86 billion last year, the estimate for this year stands at a monumental Rs153 billion. Privatization or grounding the airline appears increasingly inevitable, with the government contemplating the sale of at least 51% shares along with management control.
Recent directives include the cancellation of scheduled off days for PIA employees, with the chief executive urging senior officials to expedite tasks related to the airline’s divestment process. As turbulence continues to envelop PIA, the airline’s fate remains precarious, teetering on the edge of financial instability and the government’s ongoing reformative measures.
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