The criminal neglect of the Mills incurs about $2.5bn foreign exchange losses annually to the country because of steel imports which should have been produced at the PSM
The then finance minister Ishaq Dar had asked for “workable proposals” to salvage the Pakistan Steels Mills. When stakeholders came up with a rescue plan, Dar never implemented it. His reluctance cost the national exchequer as much as Rs265bn, particularly since mid 2015, to August 2018, when the Mills became nearly dysfunctional.
The Pakistan Steels Mills Stakeholders (PSG) – including employees and private contractors — have repeatedly demanded investigation into the Mills’ financial matters including the outcome of a probe by the National Accountability Bureau. The group had reported, in a summary to the Economic Coordination Committee (ECC) of the cabinet which pointed out “unchecked corruption, inefficiencies, over-employment and lukewarm “– at times criminal — attitude of the governments to the revival of the Mills.”
The groups insists that beside the total losses and liabilities (Rs 467 billion as on 30 September 2018), the criminal neglect of the Mills incurs about $2.5bn foreign exchange losses annually to the country because of steel imports which should have been produced at the PSM.
Further continues. PTI government 50 days cost to National exchequer Rs 6 billion due to indecision i.e. Reconstitution of Board of Directors, appointment of professional Management, initiation of process of accountability, payment of final dues to retired employees and Revival of the Mills as opposed to ill-considered Privatization of the Mills. But all this went unheeded under Ishaq Dar , as the financial bleeding of the Mills continued
The bulk of the nearly 200 state-owned enterprises (SOEs) in fact present an extremely bleak picture;
PIA suffered losses to the tune of 360 b in 2017. State-run Radio and PTV run an annual deficit of Rs 5.5 billion. Power theft and inefficient transmission in 2017 accrued around Rs.53 billion. Defaults of the power sector across Pakistan ran up to Rs.200 billion in 2017.Pakistan Railways ministry faces a debt of at least Rs37.And worst of all, with a Rs 5 million per hour financial bleeding, Pakistan Steel Mills is now burdened with Rs.465 billion debt and liabilities.
The International Monetary Fund in its reports early this year had already warned that Pakistan’s gross external debt in terms of exports will deteriorate to 316 per cent this year in June compared to 193.2 per cent back in 2013
As a whole 183 state-owned enterprises (SOEs) employ over 400,000 employees, amassed a grand sum of Rs52.3 billion in net profits. This translates into a net profit margin of merely 1.25 percent, and Return on Assets (ROA) at 0.48 percent.
Coupled with the reckless borrowing by the previous government – a staggering $42.6 billion in five years, breaking all records since Pakistan’s inception in 1947 – the situation was already writ large on the walls. The International Monetary Fund (IMF) in its reports early this year had already warned that Pakistan’s gross external debt in terms of exports will deteriorate to 316 percent this year in June compared to 193.2 percent back in 2013.
Follow examples of Germany, which in early 1990s sold many sick state entities for symbolic ONE Mark price to let the private sector deal with them. France and UK (under Margaret Thatcher) followed the same path and ended up reinvigorating productivity.
Listen to technical expertise and don’t allow the bureaucracy to way-lay your reform and restructuring plans. Running businesses is not the business of the government. The business of subsidies – which benefit only a few – must come to an end.
Why should poor Pakistanis – already burdened with indirect taxes and massive public debt — continue paying for the incompetence, mismanagement and the vested interest – three major reasons why most state enterprises are sick and bleeding?
The writer is Editor, Strategic Affairs, and also heads the independent Centre for Research and Security Studies, Islamabad and author of Pakistan: Pivot of Hizbu Tahrir’s Global Caliphate. Can be reached at Imtiaz@crss.pk
