CSD

EXCLUSIVE INTERVIEW: BRIG. JAWAID AKHTAR CHIEF OF CSD SPEAKS ABOUT THE ROLE OF CSD CHAIN OF STORES

AMANULLAH BASHAR
Sep 18 - 24, 2006

Brig. (Retd) Jawaid Akhtar, SI(M), Managing Director of CSD outlining the basic functions of CSD has observed that it is chain of consumer item stores all over the country and its prime objective is to provide essential items of daily life at an affordable rate to the people in general and army personnel in particular. In a way it is contributing significantly to the government agenda of "Poverty alleviation". The CSD Chief was talking to Pakistan & Gulf Economist in an exclusive interview.

Brig. Jawaid Akhtar, carries a Masters (M.Sc) degree, and Military Education JSSC and PSC to his outstanding academic profile. He has served for the Army for 32 years and his outstanding services were duely acknowledged when he was awarded Sitra-i-Imtiaz (Military) by the President of Pakistan, in recognition of long meritorious service.

PAGE: What is the vision of CSD and its future plans for further expansion of its business activities?

BJA. Primarily speaking, CSD is a welfare organization providing quality articles of daily use at reasonable rates to Armed Forces personnel/their families and civilians residing in cantonment areas. CSD tries to provide max possible relief to customers by keeping its prices lower than the market/Utility Stores rates. These articles are also supplied to unit canteens in peace as well as in operational areas. CSD is running Hire Purchase Schemes under which household items incl cars/motorcycles are issued to Armed Forces personnel on installments. CSD has the plan to establish/construct modern and top of the line few outlets in big cantonments/cities. In addition, few existing shops will be renovated/expanded with modern touch. We intend, adding imported stuff in our shops.

PAGE: Would you like to elaborate nature of services CSD is providing to its clientele?

BJA: One specialized division is dealing with Hire Purchase Scheme for CSD. Actually, it was started in 1975 for Armed Forces personnel as a welfare measure under which 316 kinds of durable items such as motor cycle, deep freezers, refrigerators, televisions, air conditioners, sewing/washing machines, computers and gas appliances are issued on easy instls. The scheme is so popular that approx 110 applications are received on daily basis. Presently, there are around 48,000 clients on Hire Purchase list where a capital of approximately Rs. 770 (M) is in circulation. Recently all information about CSD HP Scheme have been placed on CSD Website and ADN. Car HP Scheme has also been started from July 2003 for Armed Forces officers. So far, about 3121 cars have been issued to officers. The scheme is unique and very popular amongst the officers due to substantially low mark up rates as compared to similar car financing schemes in the market.

CSD is a chain of 100 retail outlets spread all over the country in cantt areas. Its inventory comprises of 8000 items. The department is carrying out annual trade purchases worth Rs 2000 million. We are maintaining uniform prices through out the country; be it Skardu, Khuzdar, Rawalpindi or Karachi. During the month of Ramzan (Sep - to Oct 2005) prices of 955 items were slashed down to provide extra relief of 5 to 10% to our clientele. Overall we have passed on a relief package of Rs 130 million to CSD customers during last financial year. The department is also running a large no of non-viable shops mostly at remote places, merely for the welfare of its customers.

PAGE: Does it provide goods to its relevant customers exempted from duty? As I remember that cigarettes it used to supply, were exclusively supplied by the companies free of duty does this culture still prevail?

BJA: CSD is not exempted from taxes/duties. It is paying all taxes to the government on purchase & sale. In fact, it generated revenue for the government to the tune of Rs384.018 million during last financial year in the form of different taxes.

PAGE: Is the total budget of CSD normally audited?

BJA: the well-recognized Auditors audit Yes, CSD budget and accounts.

PAGE: How does it differ from the concept of utility stores facilitating the civilians?

BJA: Presently, CSD and USC are the only chain stores having their outlets all over the country. The mission of both the chains is almost the same viz to provide good quality items of every day use to common man at reduced rates. It follows that both are on one hand welfare organizations and on the other, important instruments of the Govt designed to stabilize prices in the market. Salient features of CSD working are as under:

a. Retail sale prices at CSD are uniform, may it be major cities or remote places.

b. Retail sale prices at CSD are so worked out that these are always and invariably less than market and even USC.

c. On the other hand CSD is paying all duties and taxes.

d. The quality vis-a-vis price is far better than any other store.

Being a welfare and not profit earning organization, sale prices are worked out so precisely that these are less than market and USC and at the same time CSD remains economically viable. Fact remains that the above features enable CSD to be different from USC in so far as the attributes of welfare and economic viability are concerned.

USC is being run by the Govt of Pakistan and providing the various facilities to gen public. Provision are at time subsidized by the Govt, but the same facilities are not being provided to CSD.

PAGE: What is the current value of the assets and properties belonging to CSD?

BJA: The aim of the CSD is to pass on maximum relief to its customers and not to accumulate assets and properties. CSD took start with total assets of Rs. 2.4 million in 1947 and now running business with fixed assets of Rs. 41.3 million & total net lay out is of Rs. 599.378 million.

PAGE: Does CSD operate during wartime to ensure supplies to the troops?

BJA: Yes, of course CSD operates during war also. The welfare mission of the department in the service of Armed Forces of Pakistan in peace and war is to provide the troops with quality goods of daily use, other then supplied by Govt, at reasonable rates through its retail shops. In addition, to form the basis of an efficient canteen organization both during peace and war for troops located any where in the country and operational areas.

PAGE: Any other information which is to be included.

BJA: In addition to CSD shops, department also establishes private through contractors to provide additional facilities not provided by CSD. CSD has given employment to around 1400 people in various categories.

AN INTRODUCTION TO CSD

CSD is an organization, which has its own name and standing. No cantonment in Pakistan is complete without CSD. CSD is extending services to the Armed Forces Personnel by providing quality articles of daily use at reasonable rates. In addition, CSD is providing durable items of house hold use such as TV sets, deep freezers, refrigerators, ovens, motor cycles, cars etc on easy installments to serving Armed Forces personnel.

CSD is recognized in the civil sector as one of the largest retail store chain of standing in the country. CSD generates own funds and manages the affairs without any outside financial help or assistance. It is financially viable and profit earning organization. CSD's sound financial health has placed it high on the rating of the banking sector. Thus enjoying all the facilities a bank can extend. CSD is growing at very fast pace. It started its business with outlay of Rs. 2.4 million in 1947 and now grown to Rs 599 million in year 2005.

Historical Background. The history of CSD goes back to year 1927. It served the British Indian Army in the Sub-Continent upto 1947. At the time of Independence in 1947, it was divided as CSD Pakistan and CSD India. Initially, a Government Department, in 1959 it was declared as a "Non Government Commercial Concern under the control of Ministry of Defence for the welfare of Armed Forces Personnel". On independence the CSD inherited three transit depots located at Karachi, Rawalpindi and Patanga (East Pakistan). There were no shops. The unit canteen contractors drew their requirements on prepayment from the depots for sale in the unit canteens. The total manpower employed was 3 managers, 57 salesmen and 30 workmen under a general manager located at Karachi. The Capital outlay was about Rs 2.4 million. All big garrisons had officer's shops, which catered for the needs of officers only. In 1960 all officer's shops were converted into retail shops for catering the needs of all ranks.

Present Status. Over a period of time the Department expanded and spread over in whole of the country. The CSD outlets were established in all most all the Army, Navy and Air Force garrisons. Today the department has over 100 outlets. Its capital outlay grew from Rs 2.4 million in 1947 to Rs 599 million in Jun 2005. The turn over of the business is around Rs 5.1 billion in a year. The details of CSD outlets are as under: -

a.

Head Office CSD

-

1

b.

Zonal Offices

-

3

c.

Depots

-

4

d.

Petrol Pumps

-

4

e.

Shops

-

92

MISSION

CSD is providing service to the Armed Forces of Pakistan with the following mission: -

a. To supply entitled personnel with standard quality articles of daily use, other than those supplied from the Government or other authorised sources, at reasonable rates through its own retail outlets and unit canteens.

b. To form the basis of an efficient canteen organisation in peace and war for troops located any-where in the country and operational areas.

ROLE OF CSD

CSD's status is that of a Non-Government Commercial Organization under Ministry of Defence, meant for the welfare of Armed Forces Personnel. The dual role of a commercial concern and a welfare organization is performed by CSD as under:

a. As a Commercial Organization. CSD raises its own funds, buys and sells like other business organizations. CSD does not enjoy any exemption from duties/taxes/levies etc or subsidy or any other financial support from any quarter.

As a Welfare Organization. CSD tries to provide maximum possible relief to the customers by keeping its prices lower than the market and as far as possible even less than Utility Stores or at least at par with the later. Organization

7. There are three main tiers of organization in CSD. These are:

a. Board of Control.
b. Head Office.
c. Field Organization.

Board of Control. The Board is constituted of senior officers of Armed Forces, Ministry of Defence and Ministry of Finance (Military). The Board guides, supervises and controls the activities of the Department on behalf of the Ministry of Defence.

HEAD OFFICE

Managing Director (MD) an officer of the rank of retired Brigadier is the Chief Executive officer of CSD and also an exofficio member of the Board of Control. He is responsible to the Board of Control for the efficient functioning of CSD in peace and war.

Directors. Managing Director is assisted by the following Directors in execution of his duties:

(1) Director Personnel & Administration - DP&A
(2) Director Purchase & Supply - DP&S
(3) Director Stores & Distribution - DS&D
(4) Director Finance & Accounts - DF&A
(5) Director Hire Purchase & Information technology - DHP&IT
(6) Director Audit & Training - DA&T

Board of Management. Board of Management headed by the MD and consisting of all directors deliberates on the important issues concerning the Department. Agenda points brought to this forum are discussed in detail and decisions taken in the best interest of the Department. In this way, unilateral decisions are avoided and best possible options implemented for smooth functioning. Recommendations of the board where required are forwarded to Chairman BOC for approval. The matters which are generally deliberated and decisions taken are:

(1 ) Procurement of trade and hire purchase items.
(2) Adoption of ways and means for improvement in sales.
(3) Fixation of selling prices of CSD items.
(4) Administrative functioning of the Department.
(5) Major problems/issues confronting the Department and their remedial measures.
(6) Stocking policy and its revision.
(7) Induction of new items for CSD.
(8) Manpower - induction policy and its revision.
(9) Promotion policy and its revision.
(10) Miscellaneous day to day happenings affecting the Department

FIELD ORGANIZATION.

The field organization has been divided into three zones, i.e., South Zone, Centre Zone and North Zone with their headquarters located at Karachi, Lahore and Rawalpindi respectively, each being headed by the Zonal Manager, who is retired Col / Lt Col. Each Zone is consist of following setup:

A. NORTH ZONE

(1) Depots

- 02 (1 each at Rawalpindi & Peshawar)

(2) Petrol Pumps

- 03 (2 at Rawalpindi & 1 at Peshawar)

(3) Shops

- 47 (Spread Over entire NWFP, Northern Area and Part of Punjab)

(4) Manpower

- 392

B CENTRE ZONE

(1) Depot

- 01 (at Lahore)

(2) Shops

- 23 (Spread Over entire Punjab)

(3) Manpower

- 241

C. SOUTH ZONE

(1) Depot

- 01 (at Karachi)

(2) Petrol Pump

- 01 (at Pano Aqil)

(3) Shops

- 22 (Spread Over entire Sindh and Balochistan)

(4) Manpower

- 187

CSD Performance / Management 11 Sale. The sale during last five years has increased from Rs. 1465 Million to Rs 5132 Million. Net increase by 254%. The details are as under:

(Rs in Million)

S/NO

FY

SALE

%AGE INCREASE

a.

2001-02

1465

-

b.

2002-03

1640

12%

c.

2003-04

2369

44%

d.

2004-05

3442

45%

e.

2005-06

5132

49%

FINANCIAL MANAGEMENT

a. The financial transaction which is now touching Rs 5.132 Billion is being managed efficiently. During last many years not a single case of fraud or mis-appropriation has surfaced.

b. The payments of suppliers bills, govt. taxes, utility bill, banks markup etc. are always made in time.

c. All financial activities are subjected to internal, external and Sale and Income Tax Departments audits. No case of fraud or negligence has ever been reported by the audit agencies.

d. CSD management always remains conscious to have proper check over gross profit and operating expenditure. The percentage ratio of gross profit and operating expenditure viz-a-viz sale of last five years are shown as under: -

(Rs in Million)

S/NO

FY

SALE

GROSS PROFIT

OPERATING EXP

NET PROFIT

AMOUNT

%AGE

AMOUNT

%AGE

AMOUNT

%AGE

(1)

2001-02

1465

123

8.3

111

7.5

12

0.7

(2)

2002-03

1640

142

8.6

116

7.1

26

1.5

(3)

2003-04

2369

198

8.3

143

6.0

55

2.3

(4)

2004-05

3442

218

6.3

169

4.9

49

1.4

(5)

2005-06

5132

320

6.2

219

4.2

101

1.9

INVENTORY MANAGEMENT

The volume of stocks is determined by monthly turn over (Sale) of stock. To prevent overstocking, deterioration in ware-house, we closely monitor sales of each item at each outlet and accordingly tailor our demands. The stocks viz-e-viz trade sale of last five years are as under:

(Rs in Million)

S/NO

FY

STOCK HELD

SALE

TURN OVER

a.

2001-02

218

1247

5.72

b.

2002-03

228

1317

5.77

c.

2003-04

223

1621

7.26

d.

2004-05

235

2073

8.82

e.

2005-06

297

2975

10.00

PROCUREMENT MANAGEMENT

a. Procurement is carried with greater care with the following considerations:

(1) Diversification of sources of purchase.
(2) As far as possible purchases are made direct from manufactures.
(3) No compromise on quality.
(4) Lowest possible purchase rates.
(5) Purchases of seasonal items to be made during the period when rates are the lowest.
(6) Bulk purchase of an item for which CSD has storage facilities and which accrue substantial benefit to CSD.
(7) Opportunity Buying of an item available at lesser rates of compatible quality.
(8) Special cash deals to achieve more discount and also ensure un-interrupted supply of fast moving items.
(9) Through open tenders.

b. CSD Authorized Stockage List (ASL). Every item sold through CSD is properly listed on ASL before it is placed for sale. At present there are about 8000 items held on our ASL.

c. Induction of New Branded and Unbranded Items. A11 new items to be inducted in CSD are put through the following process:

(1) At the request of the supplier / manufacture, they are asked to give details about quality, rate- structure, production facilities and salient features of the items.

(2) The proposal is considered by Board of Management headed by MD, who keep following factors in mind while considering their induction:(a) CSD's requirements of the items. (b) Market popularity. (c) Would-be sale potential at CSD. (d) Compatible items already held on ASL. (e) Quality. (f) Packing. (g) Availability of rack space. (h) Credibility of the supplying firm. (j) Sales tax registration.

(3) After having considered the afore-mentioned factors, the board approves induction or otherwise of the items.

d. Fixation of Prices - Policy. Following policy govern price fixation process:

(1) Minimum profit to cater for overheads only.
(2) Cheaper than Utility Stores Corporation (USC)/market.
(3) Most essential items viz ghee, atta, sugar etc, are sold at break-even prices.
(4) Bare minimum profit on seasonal items.
(5) Reduction in prices on special occasions such as Ramzan and Eid.
(6) Consumer promotion as and when offered by the suppliers, the same is passed onto the customers.

e. Sale Price Fixation. CSD management is following a well/time tested policy regarding fixation of selling prices, the basic idea is to provide maximum possible relief to our clientele and yet remain profitable. However, following factors govern the fixation of CSD selling prices:

(1) CSD purchase price.
(2) Market price.
(3) USC price.
(4) Discount obtained from the supplier.
(5) Sale potential.
(6) Consumer promotion.

f. Quality Control

(1) To ensure induction of good / genuine quality items, following factors are paid due attention:

(a) Dir purchase from reputed national and multinational companies.
(b) Unpopular and dubious brands are not inducted.
(c) Laboratory tests, particularly of food items.

(2) Stringent action is taken against a supplier if his item is found to be sub-standard at any point in time.

(3) CSD Management ensures to procure best quality products for its customers. Quality of all products is ensured through fol means at the time of induction/ procurement:

(a) Visual insps.
(b) Cooking tests.
(c) Lab tests, where req through NIH and PCSIR labs.
(d) Quality assurance tests of uniform cloth through Army Labs.

15. Taxes Paid. CSD is paying taxes, like sales tax, with holding tax and income tax to the Government. The state of taxes paid during last four years as under:

( Rs in Million )

TYPE

ACTUAL 2002-03

ACTUAL 2003-04

ACTUAL 2004-05

2005-06 TENTATIVE

Taxes (all types)

203.565

245.679

296.589

384.018

CONCLUSION

The Department is progressing day by day apart from providing best quality items to its clientele. The Department was declared 'Best in Trade' by Rawalpindi Chamber of Commerce and Industry last year.