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The general performance of public sector industries shows an expected loss of Rs.11,697 million in the outgoing financial year

Oct 02 - 08, 2000

The Chief Executive General Pervez Musharraf has lamented that all autonomous organisations under government control were incurring heavy financial losses and almost all of them were facing serious financial crisis. He said that these national assets had been madly run and criminally mismanaged by the successive governments in the past as a result that these institutions have become a big burden on the national resources.

That autonomous institutions under government control face huge financial losses has always been an open secret. But when Chief Executive told a gathering of Pakistan Americans in New York that national assets had been mismanaged and all government institutions were in dire financial straits, he made this fact sound more authentic. Citing examples, he mentioned institutions like PIA, Pakistan Railways, Wapda and National Shipping Corporation. Barring exceptions, the list of loss-making institutions is actually much lengthier. Even bigger is the drain they have caused to the national exchequer.

According to the latest Economic Survey, the general performance of public sector industries shows an expected loss of Rs.11,697 million in the outgoing financial year. This is despite the fact that the total number of employees in this sector has declined by around 7,000 and both production value and sales have gone up. As for the Railways, operational inefficiency, over-staffing and mismanagement have been officially acknowledged as both the reasons and symptoms of its decay. Its outstanding operational deficit is Rs.2.8 billion. PIA's losses are reported to have soared to over Rs.1 billion in the last six months of the 1999-2000 financial year. Its total debt stands at Rs.33 billion. Rice Export Corporation, Cotton Export Corporation, Trading Corporation of Pakistan, Pakistan Steel Mill and many other such organisations are loosing billions of rupees every year.

Last year a sub-committee of the National Assembly's Public Accounts Committee was informed that the Cotton Export Corporation of Pakistan has sustained accumulative losses of about Rs.7167 billion during the last 24 years mainly because of mismanagement and inefficiency. As on June 30, 1997 these losses were to the tune of Rs.1536 million. The annual report of Trading Corporation of Pakistan (TCP) has revealed that the Corporation has suffered a loss of over Rs.115 million during last financial year showing an increase of over 180 per cent as compared to Rs.40.5 million losses in the earlier financial year. According to a special audit report on Rice Export Corporation for 94-97 has incurred a loss of over Rs.17 billion during this period. The Auditor General of Pakistan has recommended a high level committee to investigate all the cases involving losses and fix responsibility on the accused persons.

The losses being suffered by the bodies like the REC, CEC and TCP are incomprehensible in view of their charter of operations. These corporations are supposed to purchase rice and cotton from the market and export them abroad in keeping with the principles and profitability of commerce and trade. There is, therefore, hardly any room for them to suffer any losses in the process, particularly when there is not much variations in their international price structures. The only cause of these losses is thus corruptions, mismanagement and inefficiency of the individuals responsible for their operations.

In spite of frequent rise in fares, the PIA and Pakistan Railways have not been able to manage their finance. In Railways the decline has been so steep that rehabilitation alone has become a hugely costly proposition. Rs.515 million has been allocated in the current budget for import of locomotive spares while Rs.160 million will be spent on import of spares for vehicles other than engines, Rs,770 million will be spent on indigenous purchases and Rs.100 million on fuel expenses other than that for operation purposes. An equal amount has been earmarked for value addition in workshops. However, for the PR to come out of the red has become an arduous task in view of its massive financial mismanagement. It owes an overdraft of Rs.19 billion to the State Bank and a heavy amount is required for payment of interest on it and fulfilment of pension liabilities. There is also the overhang of foreign loans and interest charges. Rs.684.530 million has been allocated for repayment of foreign loans while Rs.2,026.22 million has been earmarked for interest charges.

The conditions of Banks and DFIs in public sector are not much different. According to the press reports, situation in National Development Finance Corporation (NDFC) is most serious. According to audit report the NDFC has suffered staggering losses of over Rs. 22 billion for the year ended on December 31, 1999. The total liabilities of NDFC exceed its total asset by over Rs.21 billion which threatened even its existence, the report says.

It is a cruel irony of circumstances that public sector institutions are now riddled with the same, even worse, ills which they meant to remove. Their ability to produce jobs as a social service and contribution of enhanced revenue to the national exchequer were supposed to be their strong points. But all this has, with the passage of time, turned out to be a case of shattered expectations. Political interference, bureaucratic control and financial indiscipline have coalesced to push public sector institutions to reck and ruin.

The privatization process, started in the early 1990s, was evidence of the realisation that governments had failed to manage these institutions. Despite privatization of 100 industrial units so far, which fetched 1.7 billion, the government continues to pick up a huge bill on account of losses in the remaining institutions. In the new phase of privatization, the government hopes to get another $4 billion through privatizing more units. This is the only and the easiest course open to unload the loss burden. The Chief Executive has promised to curtail mismanagement of national assets. The most clear indication of this will be how speedily his regime deals with loss-making public sector institutions.