SOE burden
PAKISTAN’S state-owned enterprises are haemorrhaging, putting a tremendous burden on the debt-ridden government’s shrinking budget resources and leaving little for development projects. Yet privatisation of these entities does not seem to figure on the policymakers’ priority list, if there is one. Perhaps the only time the privatisation minister was seen speaking on the job he is assigned to was when he emerged to blame the recent failed PIA sale attempt on the previous caretaker government. Even then he did not elaborate on plans, assuming he has some, to sell off the other loss-making companies.
Likewise, a committee formed by the government under the finance minister to define the way leading to the privatisation of the SOEs and reduce their burden on government finances through other corporate options has not achieved anything so far.
How rapidly most SOEs are eating into the country’s meagre financial resources can be gauged from the disclosure by a new finance ministry report on the performance of SOEs during the first half of FY24. The report says that the SOEs had suffered cumulative losses to the tune of Rs405.86bn during the six-month period from July to December 2023, with 15 energy and transport companies accounting for 99.3pc of the amount. Overall, accumulated SOE losses have soared to Rs5.9tr.
As if this were not worrisome enough for the authorities to move into action, the report adds that the power distribution companies, or Discos, had lost Rs1.46tr in system losses during the same period. This translates into a burden of roughly Rs14.6 per unit of electricity on consumers, and is equal to almost two-thirds of the total capacity payments that the government is estimated to pay to the Chinese, public and private power producers this fiscal year.
Surprisingly enough, many of these loss-making companies have been on the chopping block of privatisation for decades without any progress. The lack of progress on privatisation of loss-making entities has raised questions around the rationale of significant expenditure on the ministry and its bureaucracy.
That said, the cash-strapped government must review the situation and push for quicker privatisation of SOEs, instead of constituting committees that do not work. This is not only crucial to save resources being spent to keep these entities but also to meet one of the core conditions of the ongoing IMF programme.
Published in Dawn, December 30th, 2024