The Utility Stores Corporation [USC] is embroiled in financial irregularities and had become a loss-making corporation instead generating income for the govt.
Not only USC but almost State Owned Entities [SOEs] or Public Sector Enterprises [PSEs] are rattling, taking its last breath and running in extreme losses since decades though the subsequent government kept its wheel running through handsome subsidies [ventilator support] but it is vivid that PSEs are no more profitable for the govt. & critically facing conspicuous loss.
The example of Pakistan International Airline [PIA] & Pakistan Steel Mills [PSM] are before us where these two SOEs have collapsed, it is running on losses & even unable to generate salaries for their own employees rather rely on govt. fund to disburse the salary – The govt. since long running these sick units on bailout package as their losses continue to mount.
Public sector participation in the market has evolved over the years, with only 12 companies at the time of independence to 257 companies in late 1980’s.
However, in the past two decades, disinvestment and deregulation promoted greater private sector participation through a reduction in state owned entities at Federal Government level which now stands at 190
There are 190 PSEs where only few generating revenues otherwise majority has lost its strength and that’s only being aided or pumped through hefty subsidies otherwise it’s a complete disaster on the part of PSEs own productivity.
The Utility Store Corporation provides daily use items to the poor and low-income people at discounted rates. It has 5,500 retail outlets across Pakistan with 14,500 employees.
According to reports, the USC faced a loss to the tune of Rs1.36 billion during the first quarter of the current financial year 2017-18
with negative equity of Rs1.808 billion and outstanding payments of Rs5.6 billion to vendors who has stopped supplying goods to the utility stores because of nonpayment of outstanding dues.
The Utility Store Corporation in 2010-11 earned Rs843.19 million whereas subsidy stood at Rs8.9 billion in order to provide commodities for consumers at concessionary rates. Its profit dropped to Rs775.28 million in 2011-12, but the subsidy rose to Rs12.4 billion.
Its profit jumped to Rs1.399 billion in 2012-13 and subsidy also increased to Rs18.53 billion.
However, when PML-N government came to power in June 2013, USC’s earnings were wiped out and it incurred a loss of Rs202.32 million in 2013-14, subsidy allocation also dropped to Rs12.544 billion - The loss continued to swell reaching Rs3.94 billion in 2016-17. Sales also came down from Rs68.91 billion to Rs57.91 billion.
The Ministry of Industries and Production blamed the nomination of private-sector members on the USC board of directors for the loss, saying they had no experience of working with utility stores - Besides the absence of experience, the appointment of private sector directors on the USC board also proved to be a conflict of interest.
Even though Pakistan People Party [PPP] & Pakistan Muslim League Nawaz [PML-N] government during theirs five years tenure have been boasting about their economic achievements but situation of PSEs have been very gloomy and enfeebling.
Here the Public sector enterprises (PSEs) as a whole have continued to bleed and suffered a cumulative loss of Rs3.746 trillion over that period.
Earlier, during the tenure of PPP administration, the scenario was not favorable either as these PSEs recorded an average loss of Rs400 billion annually.
Seeing that, PML-N party had made reforms in state enterprises a crucial part of its election campaign through a combination of restructuring and privatization - However, after the PML-N took reins of the country in June 2013, losses in PSEs continued to mount, they increased toRs495 billion in 2013-14,
Rs570 billion in 2014-15,
Rs712 billion in 2015-16,
Rs862 billion in 2016-17 and
Crossed the trillion mark in 2017-18, recording a huge loss of Rs1.109 trillion.
Here Federal footprint is given below about State owned entities [SOEs] performance for the year 2013-14 enabling the reader to understand that how since decades Public Sector Enterprises or State Owned Entitles have lost their empire and brought nothing for the govt. but remained a constant threat to the economy asking aid to run its business or relying on bailout package.
State Owned Entities (SOEs) fulfill a plethora of socio economic functions through provision of services in strategic sectors where sometimes market system does not find enough incentive to deliver especially in the strategic sectors like Transport, Communication and Public utilities, including but not limited to Energy and Natural resources. Sectors like heavy industries, Banking and Finance, Food and Agriculture also have SOEs presence alongside a vibrant and healthy private sector growth.
SOEs constitute a considerable portion of the country’s macro economy, employing 423,254 people yielding a considerable 5.5% contribution in non-tax revenue in the form of dividends, with a significant asset base worth Rs 9,633 billion, with a turnover of Rs 5,257 billion contributing a 20.7% to the country’s Gross Domestic Product (GDP) - almost as important as the agriculture sector contributing 21% to GDP - It is therefore of immense importance to understand the contributions of SOEs to the national economy over the years.
SOEs are further classified into seven sectors namely; Energy, Financial, Industrial & Engineering, Trading, Services, Promotional & Advocacy and Transportation. It is a directory of the complex network of SOEs, enabling an aerial view of Federal Government’s footprint in the national economy.
If we do administrative snapshots of SOEs there are 190 units [stated above], working under the domain of govt. where Public sector companies has 175 including 78 that is subsidized by the govt.
Development Finance institutions [DFIs] has 8 units whereas Federal authorities has 7 – Commercial is categorized into 130 where 66 runs under subsidy – Noncommercial has 45 units including 12 subsidy - Under the Companies ordinance there are 123 units with 66 subsidized – Under special Enactment is 7 while under section 42 there is 43.
In short FY 2013-14 SOEs in brief – No. of entities 190 where PSCs were 175 – Commercial 130 – non Commercial 45 – DFIs 8 & Authorities 7 – No. of employees FY 2013-14 were 423,245 whereas FY 2012-13 were 429,356.
In terms of Net profit & according to report published FY 2012-13 & 2013-14 – Only 10 units produced well such as OGDCL – NTDC – PPL – FESCO – GHPL – LESCO – PARCO – PSO – MEPCO & IESCO while top 10 loss-making PSCs were PIA – PESCO – PSM – SEPCO – HESCO – QESCO – TESCO – GENCO III NPGCL – GENCO IICPGCL – GENCO IV LPGCL - It means 180 units out of 190 were running in loss except 10 were generating revenues for the govt.
The reason of vulnerability of major Public Sector corporations were extreme intervention of Political Parties – Union involvement whether its staff or officers associations – Political appointments – killing merit criteria while recruiting – heightening nepotism and favoritism that caused to convulse the entire setup and now its staff crying not to kick them out but regularize.
Regularize them for what the entire Utility Store Corporation has been collapsed - why and how to keep 14000 staff in 5000 Utility Store Corporation [across the country] - who will feed them and for how long?, said a seasoned economic analyst
If the USC has closed its production no more worth full and efficient giving consecutive loss then why to keep staff - Close or windup the Units and induct the staff on merit in other department where their services can be utilized otherwise give them ‘’Golden shake hand’’ & close the entity.
If the govt. serious to uplift the sick units the first thing they have to do is to
a) Stop Bailout package to run the ‘’SICK-UNITS’’ those have already lost its strength
b) Retrench staff by introducing ‘’GOLDEN SHAKE HAND’’ scheme instead to feed as unit is no more worth full or able to run - has been dysfunctional – why to get loan and pay salary for what? Unnecessary giving load to national exchequer
c) Bar and ban trade-union completely – no laxity any more - PIA & PSM became the victim of rising Union-hold in administrative matter & their undue pressures ….GUNDA GARDEE – hijacking the management etc.
d) Check all the recruited staff their merit for the position they hold
e) Get their certificate verified from the Higher education
f) Check the ghost employees
g) Whoever close to retirement age, send them on force retirement
h) Whose service has been more than 20 years ask them to take ‘’Golden shake hand scheme’’ otherwise terminate them with the only reasons that unit is sick and going to shutdown
i) Take a onetime load and close all sick units why to run on bailout package as it implicates it’s a sick units.
j) No need to take loan to disburse salary for the ‘’SICK UNITS’’ which is not functional or has closed its production
k) After doing such exercise if seem to revive the unit, go ahead with low percentage of staff not an army on merit – no political support
l) Immediately stop medical facility that is being misused or reduce its volume in terms of staff family and their parents
m)Revise the perk avoiding of more burden on entity set up
n) Hire new and young highly technical and professional team instead to feed the old and tired personnel who has been on role since decades
o) Take drastic action whoever goes against company policy
These are the measure that’s need to introduce immediately instead to get more burden on national treasury and nursing who are adding no value but just sitting like Pakistan Steel Mill & PIA an unending burden to the govt.
Speak Chinese team to buy the unit and merge the staff or sell out and leave on their discretion.
During the tenure of Pervez Musharraf Pakistan Steel Mills was grooming well & identifying as a profitable entity in the country producing a sizeable profit? It had notched up cumulative profit of Rs9.54 billion up to financial year 2007-08
But it is PPP & PML-N govt. who separately had been in power from 2008 to 2018, failed to efficiently run PSM a mammoth and giant industry as its financial condition deteriorated persistently over the years and now it has completely been collapsed tuning it losses Rs200 billion.
Since PPP came into power PSM started crumbling from 2008. A major reason behind the mill’s failure was thousands of new appointments made by the PPP government.
PSM’s manpower requirement could be met by 9,000 employees, but their number reached 17,000, putting additional burden on the Steel Mill steel that’s became the crux and curse for PSM disaster.
Another main reason was serious Unionism interference, disabling management to work smoothly, Unending Political influences, impending Labor strikes and impasse obstructed to continue its production that suffer losses since 2009
PSM recorded a loss of Rs16.9 billion in 2008-09, which jumped to Rs118.7 billion in five years. When the PML-N government came to power, PSM’s loss continued to swell and reached Rs200 billion at the end of its tenure on May 31, 2018.
PIA is also other PSCs that is suffering with losses – the reason behind is the same as PSM - due to condensed political influences, appointment not on merit, extreme unionism interference, regular strike and deadlock & unmanageable nepotism and favoritism caused to swamp PIA.
On annual basis, a gigantic loss of Rs650 billion is being borne by the government.
A country with massive budget deficit is unable to feed these institutions whose performance has been marred by nepotism, corruption, political interference, unionism & mismanagement etc.
PIA informed the Supreme Court that it had accumulated losses of Rs356 billion with total liabilities amounting to Rs406 billion against assets of only Rs111 billion.