PNSC's Financial Results
The increased accumulated losses poses many challenges to the shipping sector
By SYED M. ASLAM
Nov ,12 - 18, 2001
Despite earning operating profit, compared to an operating loss the previous year, the accumulated loss of state-owned Pakistan National Shipping Corporation soared to Rs 1.4 billion resulting in a negative equity of Rs 94 million in the year ended June 30, 2001. In addition, the fleet strength of the fledging national flag carrier decreased from 15 to 14 vessels cutting its cargo carrying capacity from 261,836 metric tons dead weight to 243,749 metric tons dead weight with the disposal of m.v. Ayubia, a 1981-built break-bulk carrier.
The rest of the remaining 14 vessels, including the three container vessels acquired by the corporation in 1996 and 11 break-bulk carriers, have also long passed their economic lives — one built in 1979, 6 in 1980, 3 each in 1981 and 1983, and one in 1985. Many of these vessels are expected to be disposed of in the near future cutting the fleet strength and carrying capacity of the PNSC to a dangerously low level and to further reduce an already negligible share in the liftings of the national sea-borne cargoes.
During last five years PNSC's financial performance has been highly erratic: its operating profits slid from Rs 282 million in 1997 to Rs 158 million in 1999 and went into black — Rs 299 million in 2000. This year PNSC managed to earn an operating profit of Rs 445 million which still did not save it from suffering a pre-tax loss of Rs 267 million and post-tax loss of Rs 312 million. Though the PNSC managed to earn an operating profit and also managed to cut its pre- and post-tax losses over the previous year the same did not help it cut its accumulated losses.
The increased accumulated losses along with reduction in fleet strength and cargo carrying capacity in addition to a fleet almost all of whose vessels have long passed their economic lives poses many challenges to the shipping sector as PNSC is the sole national flag carrier of the country. The situation also poses serious implications in the post September 11 scenario for the timely and affordable liftings of the national cargoes, particularly exports, in the post September 11 situation resulting in imposition of War Risk insurance and perceived uncertainties on the part of foreign shipping lines.
For years, PAGE has been highlighting the deteriorating conditions at the PNSC calling for restructuring of the entity on sound professional and financial lines. Year after year it called for the concerted and solid attempts to streamline the affairs in the long financially-troubled Corporation. We have pointed to the challenges in the competition-oriented world of today stressing on restructuring an entity which is extremely top-heavy and where the incentives to the staff and workers far surpass performance.
It is an open secret that years of mismanagement, lack of vision and absence of direction has brought the only shipping line of the country to a verge of collapse. The deterioration has not taken place overnight and much of it could have been avoided with prudent planning and informed decisions no matter how hard they could have been.
Today, Pakistan's external trade, particularly export orders have come to a trickle in part due to uncertainty about their timely delivery. The situation is further worsened as PNSC is able to lift only a fraction of the national sea-borne cargoes while the country is almost entirely dependent on foreign shipping lines to lift the cargoes on their own terms. Certainly, the absence of a viable national shipping fleet has made it easy for the foreign shipping lines to dictate their own terms as their loyalties do not belong to the country.
On the 5th of this month Public Accounts Committee of the government recommended to either close the financial operations of the PNSC or to dissolve the entity all together. It has also asked the Principal Accounting Officer to pinpoint those responsible for the destruction of the PNSC and to present the report within a month. On the other hand, a high level meeting presided by the Federal Minister for Communications, Lt. Gen. (Retd.) Javed Ashraf Qazi discussed measures to turn PNSC into a profit-making entity.
The minister said that despite running in losses the PNSC is performing a national service and should be kept on functioning. He also advised the PNSC brass to formulate a solid policy to make it a viable organization.
The head of the Public Accounts Committee, H.U. Baig, expressed concerns not only about the Rs 1.364 billion accumulated loss but also the spending of Rs 4 billion by the PNSC which was provided to it by the government. The Auditor General Pakistan, who also attended the meeting, strongly noted the failure to deposit back over Rs 70 million saved by the Ministry of Communications from the grant provided to it.
Perhaps the recent developments in the region which affects Pakistan more profoundly than all other countries in the region should help awaken the policy makers to understand the importance of developing the shipping sector on solid lines. This is necessary to help reduce the threatening dependence on foreign shipping lines which on the slightest of a pretext enjoy a fearsome monopoly to dictate the terms and price of Pakistan's external trade. The top decision makers should make shipping sector one of their top priorities to help avert any such situation in future.