Massive irregularities and malfeasance have recently been reported in the 56 government-owned companies of Punjab launched by the Shahbaz Sharif administration during the last nine years. As the accounts and deals of these companies have been kept in secrecy, and violate the statutory requirement of the public audit, the National Accountability Bureau needs to investigate their affairs.
Chief Minister Shahbaz Sharif, fond of doing things in haste and bypassing rules and regulations, outsourced the civil administration in Punjab and transferred the functions of the provincial government and those of local governments to newly-created limited companies, registered with the Securities and Exchange Commission of Pakistan under Article 32 and 42 of the Companies Ordinance of 1984.The transfer of functions of the civil administration to limited companies on a wide scale implied an expression of no-trust in the normal system of governance. Instead of reforming the civil service and making it efficient and responsive to modern requirements, CM Shahbaz Sharif created this short-cut that is also outside the inspection of governmental audit.
The government-owned limited companies include South Punjab Forest Company, Punjab Health Initiative Management Company, Punjab Power Development Company, Quaid-e-Azam Thermal Power Limited, Quaid-e-Azam Solar Power (Pvt) Ltd, Quaid-e-Azam Hydel Power (Pvt) Ltd, Punjab Municipal Development Fund Company, and Management Company, Punjab Saaf Pani Company, Lahore Waste Management Company (there are seven such companies in large cities of the province), Punjab Agriculture and Meat Company, Punjab Bio Energy Company Ltd, Punjab Mineral Company, Punjab Land Development Company, Punjab Model Bazaar Company, Punjab Industrial Estates Development Company, Punjab Health Initiative Management Company and so on.
An obvious aim for launching these companies seemed to be bestowing favours on malleable civil servants of the incumbent rulers who helped the Sharifs in bypassing rules and regulations in conducting the business of the state. A clear message was given to the state employees that those will cooperate regardless of legal formalities with the rulers will be rewarded. The pliable officers were hired on splendid salaries, 10-15 times higher than the normal salaries of the civil servants, on key positions in companies with boards of directors stacked with friends and relatives of the ruling party, PML-N. For example, the civil servants serving in energy companies of the Punjab government are receiving Rs1.5-2 million per month salary compared to salaries of around Rs150,000 to 200,000 for grade-21 and grade-22 officers.
Special audits were done for a few companies, such as the Lahore Waste Management Company but they were not made public, which strengthens suspicions of collusion of the rulers in large-scale irregularities and corruption
The legality of a civil servant receiving a higher salary as an executive officer of a limited company is questionable. Under the official rules, a civil servant deputed in a government-owned company is only entitled to a deputation allowance, which amounts to around Rs 6,000 and cannot receive higher emoluments. Some blue-eyed officers of the rulers are simultaneously enjoying perks and privileges of being CEOs of these companies as well as government servants.
The financial rules and regulations that govern the normal government departments do not apply to these companies though they are dealing with public funds worth more than Rs 150 billion. The advocates of government-owned limited companies argue that they help execute tasks on a fast-track basis by cutting the red-tape of bureaucratic approvals, but so far no such company has been able to deliver on its stated goals.
The creation of limited companies can be justified in certain areas of public interest where the private sector is not putting its money, such as the establishment of industrial estates like the Sunder estate near Lahore. However, the Punjab government pulled out of even normal government functions like provision of clean drinking water, upkeep of forests and the disposal of waste and provision of health services have been transferred to these companies. This approach helped the rulers bypass established rules and regulations and financial discipline. Huge amounts of money and contracts are involved in each case.
The rules of Public Procurement Regulations Authority aka PEPRA do not apply to these companies though they are created and run with public funds; they are also free from the accountant general’s and auditor general’s oversight as their accounts are audited by chartered accountants. All seven waste management companies are annually receiving funds from the province and municipal governments, but are free from official financial discipline.
Some of these companies have enacted contracts with Turkish firms on a government-to-government basis without floating tenders and allegedly doled out contracts on up to 50 percent higher rates. Afterwards, these contracts have then been sublet to hand-picked local firms without open biddings. The provincial finance department has been forced to provide interest-free loans in the name of bridge financing to some of these contractors working for the government-owned limited companies such as Quaid-e-Azam Thermal Power Company. Furthermore, the Punjab government has given at least Rs 100 billion in loans to these entities.
Lack of transparency is a major issue with all these public companies in Punjab. All the companies have been kept outside the pre-audit scrutiny of the Auditor General’s office though it is a statutory requirement wherever public funds are utilised. Most companies do not get their external and performance audits done.
Special audits were done for a few companies, such as the Lahore Waste Management Company but they were not made public which strengthens suspicions of collusion of the rulers in large-scale irregularities and corruption. Riddled with irregularities in commissioning contracts and other deals, the companies are fearful placing their records online. Those who got their accounts audited by external private auditors have not made the reports public. Irregularities and malfeasance worth Rs 80 billion has recently been reported in these companies.
Importantly, these limited companies have undermined whatever little authority local governments have vested under the new local body system. They have snatched different functions of municipal authorities like waste management, provision of clean drinking water, cattle markets and so on. Independent authorities, such as the Lahore Development Authority and its likes are already outside the ambit of municipal governments.
As a hue and cry has been raised in the media about irregularities in these companies, the Punjab government has established a committee to look into the allegations but like many such past inquiries it is meant to hush up the scam to save the skin of the rulers. The National accountability Bureau (NAB) needs to step in, seize the records of these entities and conduct an impartial probe into their affairs.
The writer is a Lahore-based journalist and works as analyst for Samaa News television
Published in Daily Times, October 31st 2017.