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June 15, 2019

No plan for loss-making public sector enterprises


June 15, 2019

ISLASMBAD: Despite rising debt of public sector enterprises (PSEs) that has ballooned to Rs1,877 billion because of continuous losses in outgoing fiscal, the government has failed to come up with any viable plan to control uninterrupted cash bleeding of state-owned entities through the budget 2019-20.

Even there is no mention of Sarmaya-e-Pakistan Limited (SPL) in the latest budget speech for 2019-20 that had come into being with the mandate to restructure loss-making entities on the pattern of Malaysian and Singapore model.

The SPL was the brainchild of former finance minister Asad Umar as he wanted to revive the loss-making PSEs through public private partnership (PPP) mode. However, after his unceremonious ousting and inclusion of Dr Abdul Hafeez Shaikh as Adviser to PM on Finance and Revenues, there was clear cut shift in thinking, philosophy and strategy of the government to move towards privatisation of viable entities as the government considered that the sale out of two RLNG plants could be done in the coming financial year with the expectation to fetch Rs150 billion.

In the budget speech, the Minister of State for Revenues Hammad Azhar stated that each year our public sector enterprises are incurring massive losses and this drain on the economy is detrimental to productivity, innovation and job creation.

In the coming years this sector will be an important plank of government’s reform agenda. A detailed implementation plan that includes corporatisation, privatisation and restructuring is being formulated and will be presented.

The two RLNG power plants are being privatised for expected proceeds of $2 billion and other smaller entities. International investors have been approached for a joint-venture in the Pakistan Steel Mills, renewal of telecom licences for mobile sector in excess of $1 billion, he added.

There is no mention of SPL at all in the budget speech and in the post-budget press briefing because it has lost the steam to fulfill the commitment to bring reforms into PSEs. With paid up capital of Rs100,000 for this SPL holding company in last Feb 2019, the government never bothered to come up with implementation plan to convert loss making into profit making entities.

The government had taken several months to register the company with the SECP at a time when around 197 SOEs in totality were making net losses on daily basis. The Ministry of Finance admitted in its official report that SOEs turned into net loss making in 2015-16 when their net loss stood at Rs44 billion as earlier these entities were running into net profits. It was first time in recent history of the country when the SOEs run into loss-making entities on net basis collectively.

The net profit was turnednto net loss for whole 197 SOEs and the national exchequer faced a loss of Rs44.772 billion in FY-2016. The actual loss is largely a result of the losses booked on the balance sheet of power distribution companies (Discos). Top ten cash bleeding SOEs have caused accumulated losses of Rs225.9 billion just in one year. The national flag carrier PIA tops among ten deficit bearing entities as it faced losses of Rs45.276 billion.

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