Record accumulated loss for the year ended June 30, 2000 has
eroded the paid-up capital of the state-owned Pakistan National
Shipping Corporation posing serious challenges for an already
financially troubled national flag carrier.
Issue No. 7 February 12-18, 2001 of Pakistan & Gulf
Economist
By SYED M. ASLAM
Apr 30 - May 06, 2001
Picture this: Foreign shipping companies enjoying a
fearsome monopoly on all national sea-borne trade dictating their own
terms and tariffs as the only state-owned shipping corporation has run
aground. Too bad to be true? Not really, if one looks at the state of
the state-owned Pakistan National Shipping Corporation's (PNSC) whose
current liabilities exceeds its current assets by Rs 1.2 billion or
more exactly Rs 1,191.125 million.
It took PNSC seven months to release the Annual
Report 1999-2000 in end January this year. It has yet to release its
half yearly report for six months ended December 31, 2000 which has
resulted in reports that the Corporation has been reported bankrupt by
its auditors. This, however, does not come as a surprise given the
precarious financial position that the Corporation has been in all
along since 1995-97 when it earned an operating profit after remaining
years in black. Since then PNSC's earnings and operating profits are
on a constant decline: 1996, earnings Rs 6,962 million, operating
profit Rs 59 million; 1997, earnings Rs 7,762 million, operating
profit Rs 282.05; 1998, earnings Rs 4,597 million, operating profit Rs
203.8 million; 1999, earnings Rs 3,711 million, operating profit Rs
158 million; 2000, earnings Rs 3,540 million, operating loss Rs 299
million which pushed accumulated loss to record Rs 1.05 billion.
PNSC fleet comprise today of 15 vessels — 12
break bulk and 3 container — all of which have long past their
economic lives particularly the former. One of the break-bulk vessel
is offered for scrap by the corporation while many more are of the
scarp list. Since 1990-91 alone PNSC fleet has shrunks by almost half
from 28 vessels to 15 vessels. The dead weight tonnage has been
reduced from 494,956 to 261,836 during the same period.
The PNSC management has already requested for
support from the Federal Government, which holds 90 per cent of the
shares. It is not the first time that PNSC, which seems to be in
financial crisis all along since it was formed by merging National
Shipping Corporation and Pakistan Shipping Corporation in 1979, has
sought the financial bailout from the government.
The Federal Government provided a subsidy of Rs 259
million to the PNSC in 1984-85. The Corporation managed to show profit
for the next two years thereafter generating losses and pushing
accumulated losses. In March 1990 the Federal Government once again
financially restructured the sinking PNSC by writing off its
accumulated losses in hundreds of millions and also raised its paid up
capital from Rs 500 million to Rs 1,143 million. Once again, PNSC
failed to perform any differently and ran-up accumulated losses of Rs
850 million in 1995-96 thus wiping out almost 75 per cent of its
increased paid up capital of Rs 1,143 million.
PNSC Board of Directors attributed the massive
operating loss last year on the unprecedented increase in the
international prices of oil which increased the expenditure on the
purchase of bunkers to Rs 606 million, almost double than Rs 319
million over the previous year. However, a look at PNSC's performance
over the years clearly shows that the Corporation has managed to earn
an operating profit only half the time since 1984.
PNSC has remained an extremely top-heavy
corporation which kept on pampering its executives in particular with
perks despite its poor financial performance. This is evident from the
total remuneration and benefits of Rs 257.7 million paid to its 610
executives; including the chairman, 4 directors and 605 other
executives, last year which far exceeded Rs 166.8 million in salaries
and allowances to the rest of the employees. However, it was the other
way around when it came to make it leaner — Though PNSC was leaner
by 437 employees on June 30 last year, the bulk of the staff cut
occurred at the low level as the numbers of executives was cut by just
12 — from 622 to 610. It were the employees in the lower cadre which
were terminated.
As is, PNSC has been bailed out a number of times
by the government. The importance of having a national maritime fleet
can hardly be over-emphasised. However, it is time to look hard at the
ground realities whether or not to re-structure the almost always
financially troubled PNSC before once again pumping millions to bail
it out.
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