The federal government has finalized the sale of the Precision Engineering Complex (PEC), a business unit of Pakistan International Airlines (PIA), to the Pakistan Air Force (PAF) for Rs. 2.5 billion. A ministerial committee has approved the deal, which includes cash payments spread over five years, and the federal cabinet is awaiting formal approval.

The sale price of Rs. 2.5 billion is significantly lower than the valuation of PEC, which stands at Rs. 6.5 billion. According to The Express Tribune, it is also just one-fourth of the offer made by a sole bidder for a 60% stake in PIA during a failed privatization attempt earlier this year.

As part of the agreement, PAF will assume Rs. 3 billion in pension liabilities for 259 retired employees and Rs. 1.1 billion in liabilities for 251 active employees. Additionally, PAF will take on the financial responsibility for PEC’s continued operations.

PEC, which specializes in manufacturing high-precision aerospace and industrial parts, has been a non-core asset of PIA. The government has been working to separate PEC from PIA and include it in the PIA holding company as part of broader efforts to offload non-core assets. As of December 2023, PEC’s assets were valued at Rs. 1.2 billion, while its liabilities stood at Rs. 2.9 billion, leaving it with a net negative equity of Rs. 1.73 billion.

The deal also reflects the government’s ongoing struggle to privatize PIA. In October, a privatization attempt failed after most bidders withdrew due to financial concerns and the government’s refusal to meet their demands.