Over Rs2 trillion go down the drain in state-owned companies

[A.Rafay]

ISLAMABAD: As the PPP government is close to completing its term, numerous promises and commitments to carry out merit-based restructuring of half-a-dozen loss-making and corruption-hit state-owned corporations, which during the PPP’s tenure have already eaten up more than Rs2,100 billion of taxpayers’ money, remain a far cry.

In 2008-2009, the then prime minister Yusuf Raza Gilani promised to restructure these entities and even constituted a committee to formulate recommendations, which were prepared and submitted but nothing has changed on the ground as yet.

The government claims to have launched the restructuring process but the sources insist that half-hearted, half-baked and incomplete reformation process initiated in some of these enterprises could not produce any positive outcome.

On October 31, less than a fortnight back, Information Minister Qamar Zaman Kaira informed the media after the cabinet meeting that the government, during its tenure, had provided Rs1,440 billion as subsidy to the power sector alone.

Although, the minister said that the government was generating power at a cost of Rs12 per unit but providing the same to consumers at the rate of Rs9 per unit, sources said that the much needed reformation of the corruption-hit power sector and merit-based appointments were crucial to check this massive loss of public money.

Only in June this year, at a high-level meeting of power sector officials in Lahore, it was admitted that the power crisis in the country had been the consequence of corruption, bad governance and meddling into the affairs of power authorities by the rulers.

Minutes of the meeting available with The News confirmed a senior power executive as saying: “The entire issue is a self-created issue.” Another senior official pointed out: “Governance is the key issue. If we improve the governance, the major problems would be resolved automatically. The postings/transfers are being made on political basis and without any merit.” Another senior Wapda official said, “In order to improve the system, we must apply good governance.”

According to the government figures, only six state enterprises, including Pepco and KESC, Railways, Trading Corporation of Pakistan, Pakistan Steel and PIA, had eaten up Rs189.7 billion, Rs148.5 billion, Rs221.9 billion and Rs396.1 billion from the public kitty in 2007-08, 2008-09, 2009-2010 and 2010-2011 respectively.

Instead of reducing their losses, these entities are getting more and more public funds in the name of subsidy with every passing day. The situation shows that the government has utterly failed to reform these entities in a manner that they could become sustainable and profit making. But since cronies have been appointed to head them, they are getting billions of public funds to squander.

Ex-PM Gilani had promised to complete restructuring of these entities by September 1, 2010 but by that time the government had hardly moved an inch to achieve the goal and stop the annual wastage of hundreds of billions on these white elephants.

Officials in the Economic Reform Unit (ERU) of the finance ministry claim that restructuring of these entities is under process, without any positive results as these entities continue to bleed and require more of taxpayers’ money.

In April-May 2010, Shaukat Tareen, just before leaving the government, had submitted to the prime minister a “National Governance Plan” that sought from Gilani to take some bold initiatives and bring about radical changes to improve the governance and check corruption.

Tareen’s report sought restructuring of key public sector institutions by appointing professional CEOs/heads of organisations, whose appointment should be ratified by parliament. They should then be ring-fenced to act independently on financial and professional matters.

The government, it was proposed, should carry out restructuring of all public sector enterprises to improve service delivery, enhance transparency and avoid fiscal burden on the exchequer. Unfortunately, nothing has been done as yet in this regard.

Over Rs2 trillion go down the drain in state-owned companies - thenews.com.pk

 

[niaz]

In my view, except in case of deep recession; it is not the government’s job to reduce employment thru public sector jobs. Beside now it has been proven that Keynesian model does not always work. Gov't should instead attempt to create wealth thru incentives to private sector, which in turn would create jobs.

PPP has always turned this economic principal on its head. In order to undermine the power of the so called 22 families, ZAB nationalized most of the large private companies in 1970 killing off the entrepreneurship for 30 years. Most of these units were privatized by later governments including that of his daughter but the damage was done.

In PPP gov’t creating jobs means giving more people work in the public sector companies. This is recipe to create white elephants which do nothing but eat up tax payer’s money thru inefficiency, theft and low productivity. We have examples of WAPDA, Railways, PIA and the Steel mill. Just compare balance sheet of these companies during Musharraf time and now and you will come to same conclusion.

Of course you call my view as ‘Capitalist’ mind-set, but I don’t need to tell you that communism failed after 78 years of experimentation. Yes, we have socialist welfare states but then citizens have to bear cost thru paying higher taxes. In Pakistan rural population don’t pay any taxes at all; indirect taxation enables even a peon in Customs or Income Tax department to earn more than highly skilled professionals. As long as this continues, there is little hope for improvement.

 

[hankau62]

In my opinion most of the money goes to pay the (fat)salary of worker and management team of these state-owned companies who do no or little work because of the lack of vison/direction by any decision maker on the top.

 

[AZADPAKISTAN2009]

I am in favour of , reducing Employment in state owned companies , and instead setting aside capital for new businesses
small business financing

Problem for State owned companies is , too many employees and less productivity

 

[VCheng]

Rs. 2 trillion is about $21 billion, over approximately five years is just over $4 billion per year. Given that the annual budget of GoP is about Rs 3 trillion, or $31 billion, this represents about 13% of the budget. Is that figure believable, given that, for comparison, debt servicing is about $20 billion and defense expenditure is about $8 billion?