Cash bleeding SOEs face loss of Rs429 bn in two years — II

ISLAMABAD: The line ministry for all SOEs in the oil and gas sector is M/o Energy. The Petroleum Division of M/o Energy deals with oil and gas sector while the power sector companies are under the purview of Power Division. These include oil and gas (8), exploration & development (3), marketing & distribution (3), refineries (2). Overall, the oil and gas companies remain the backbone of the GoP SOE portfolio and have consistently remained on the forefront of new exploration initiatives, even in the frontier areas. It is expected that with enhanced pricing initiatives and improved law and order situation, the oil and gas entities will fare better in the years to come. Overall, this sector witnessed 26 percent increase in net revenue compared to the last year. The net profit stands at Rs242 billion with sub sector exploration leading with net profit of Rs212 billion.

Pakistan is successfully overcoming the energy crisis, which has direct and indirect impact on all sectors of the economy, through increase in generation as well as strengthening transition and distribution capacities. The oil prices declined in 2019, benefit of which was passed on the consumers by the government. As of 2019, the total refining capacity of the country stood at 19.37 million tons. On the financial side, the government is making efforts to clear the circular debt and is engaged with all stakeholders to ease off the liquidity concerns. On the technical side, efforts are drawn to convert old hydro skimming refineries to hydro cracking units. Further, there are 30 OMCs in the country with PSO leading the overall market share by 42.5pc, followed by APL 10.9pc. On the natural gas side, there is a demand of six BCFD with a supply of only up to 4 BCFD. At present, the capacity of two Floating Storage and Re-Gasification Unit (FSRU) is 1,200 MMCFD and accordingly RLNG is being imported to reduce the overall deficit.

The power sector includes distribution, generation, transmission, and power management sub-sectors. The line ministry for all SOEs in this sector is M/o Energy (Power Division). All SOEs under this sector are public sector companies registered under the Companies Act 2017, except Wapda, which is a federal authority established through special enactment.

The FY2019 proved to be a turnaround year for the power sector as the net losses reduced to Rs115.3 billion compared to Rs256.7 billion last year. The government made concerted efforts to reduce transmission and distribution losses as well as improved recoveries, which remain lower than the last FY2018. Recently, the government also worked with development partners as well as the IMF to institute a circular debt management plan, rationalized tariff, initiate quarterly tariff adjustment and notified pending base tariff increases. It is expected that these structural adjustments will lead to higher sector sustainability in the years to come.

Circular debt continued to accumulate, though at much a lower rate in FY2019. The government instituted key reforms, including preparation of a comprehensive circular debt management plan, which envisaged to address key bottlenecks in operations, finance, subsidies and tariff. Also, during this year, the power sector regulator (NEPRA) issued 1,152 Generation Licenses for Conventional Power Plants, Renewable Energy Projects, Hydropower Projects, and Net Metering. One of the major developments in power sector was NEPRA Amendment Act 2018.

This act envisaged a competitive power market creating retail and wholesale markets, further bifurcating the distribution and supply of power businesses. All distribution companies are now required by the authority to file multiyear tariff petitions, so that there is an increased level of predictability and stability in the market, which is vital for improving the flow of investment to ensure the power sector growth.

On industrial estate development, this market is dominated by private sector players, yet some public entities like National Construction Limited operate in this sector. All SOEs under this category are registered under the Companies Act 2017, except the Export Processing Zone Authority, which is incorporated as a federal authority designed to increase the overall exports of the country. This sub-sector contains four SOEs and has generated net revenue of Rs2.7 billion. Moreover, the current assets of this sector also increased by 19 percent to reach Rs6 billion. There is also a substantial increment in dividends paid to the government which reached to Rs4.9 billion in FY2019.

The Wholesale, Retail & Marketing sector include three sub-sectors with four SOEs in total. The Trading Corporation of Pakistan (Private) Limited (TCP) and Utility Stores Corporation (Private) Limited (USCP) are under the purview of M/o Commerce and M/o Industries and Production. The Pakistan Agriculture Storage and Services Corporation (PASSCO) deals with M/o National Food Security and Research while the National Fertilizer Corporation (NFC) of Pakistan comes under the purview of M/o Industries and Production.

The net losses decreased by 62 percent amounting to Rs1.7 billion as compared from Rs4.5 billion last year. The sector primarily operates through entities that serve socio-economic interest of the GoP, such as management and provision of essential food commodities. The sector was able to earn revenues of Rs62.8 billion during FY2018-19. The highest performance in this sector is depicted by the Pakistan Agricultural Storage & Services Corporation Limited (PASSCO), and Trading Corporation of Pakistan showing net profit of Rs1.6 billion and Rs1.1 billion, respectively.

In media and entertainment, the Pakistan Broadcasting Corporation and Pakistan Television Corporation Limited (PTVC) are under the administrative control of M/o Information, Broadcasting & National Heritage. In promotion & advocacy, Pakistan Tourism Development Corporation (PTDC) is under purview of Cabinet Division. The remaining SOEs, including Pakistan Revenue Automation (Private) Limited and Overseas Employment Corporation (Private) Limited, fall under the FBR and Human Resource Development, respectively. This sector showed a considerable performance improvement in current financial year by turning losses of Rs1.7 billion in FY2018 into a profit of Rs46 million in the current financial year. Overall, the net revenue of this sector increased by 20 percent to reach Rs13.1 billion mark.

In the category of non commercial SOEs, during FY2018-19, 19 entities were functioning for ‘sectoral development’ and another 11 were operating as funds foundations and welfare trusts. The highest asset size was held by entities in the sectoral development category. Non-commercial SOEs employ 8,835 staff including officers, executives, staff and contractual employees. Entities in sectoral development were the largest employers (6,906) followed by education, training & skill development (1,627). In terms of employment cadres, 3pc of the total employees are executives, 18pc are officers, 62pc of all employees represent the staff cadre and only 2pc are daily-wagers. (Concluded)