PNSC's sad affairs

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

 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.