Daily Times

KARACHI: More than ‘one-go rescue plans’ of successive governments for revitalisation of state-owned entities (SOEs) – Pakistan Steel Mills (PSM), Pakistan International Airline (PIA), Pakistan Railway, Kot Addu Power, National Power Construction Corporation and Pak Arab Refinery – failed to put any positive impact.

It would be hard for the government to set and convert PIA, PSM and other SOEs into profitable organisations, experts opined.

During the former PPP-led government and caretaker regimes the Ministry of Finance tried to formulate recommendations on the proposals of governments to make these ailing entities viable, but to no avail.

Several committees were formed under the secretary finance, secretary production and other heads of affected units, but that also could not work.

The Rs 15 billion bailout package for PSM has yet to show results.

This would be the second SOE, after PIA the government wanted to privatise or close down in order to save Rs 56 billion per annum.

PSM remains a white elephant. Despite having a monopoly in the Pakistani market, it has rarely made money.

PSM employs one worker for every 50 tonnes of steel it produces. The same ratio for the world’s largest steel maker Arcelor Mittal is one worker for every 400 tonnes.

After liquidation, land should be offered to private sector industries and industrial projects while its machinery as scrap value could be easily sold to scrap dealers. The total annual payroll of PSM is more than $120 million.

This would be a lot cheaper for Pakistani taxpayer than continuing to swallow the huge, never ending losses of running the PSM.

One or more small mills should be built. A relatively new technology called DRI has made such mills feasible.

In case of failure PIA management to turn around it into profitable organisation, the government has only an option to privatise it.

Planning Minister Ahsan Iqbal at a joint press conference with Malaysian Minister for Performance Sri Idris Jala said the government could not waste billions on subsidy to PIA employees.

He said strategic partnership or privatisation of PIA was also under consideration while another option would be to close down organisation and save Rs 40 billion.

The PIA management could not give a solution to the PM about how to make it a stable body.

Privatisation is also imminent on direction of the International Monetary Fund (IMF) as it asked Pakistan government to end subsidy being given on energy and SOEs gradually.

Fazal Ahmad, an expert on public finances in Houston Texas, said Pakistan has to chalk out immediate economic recovery plan to support the falling economic conditions.

Fazal said privatisation of SOEs also came under discussion during international donors meetings with Pakistani economic teams. However to safeguard strategic components in privatisation of SOEs will be kept on priority.

Pakistan Railways, Pakistan Machine Tool Factory, some engineering SOEs and stakes in Water and Power Development Authority are ailing enterprises and eating up billions of rupees from national kitty annually.

He said international donors also put a proposal before Pakistan surplus cash crops would be kept under IMF supervision.

This will be done in case Pakistan fails to follow dictation of IMF for levying different type of taxes and increasing cost of utilities.

He was of the view whole-hearted efforts were required to accomplish this gigantic task.

The short answer is privatisation, a solution that is being considered by government. The real cost of producing steel is $495 plus $370, which is $865 per tonne. We need why should we pay such amount per tonne of steel when we can import the stuff at current world price of $630 per tonne.

The government is expected to give a subsidy of Rs 37 billion during 2017-18 to railways sector in order to minimize the losses and give timely payment to the staff of Pakistan Railways. Similarly the government would allocate Rs 4 billion for the staff of PSMs.

The government has decided to complete the transactions of PIA and the Oil and Gas Development Company Limited by June 2017.

An Iranian state company and Pakistani and Chinese companies have shown interest in investing in PSM.

A committee has been formed to prepare a business plan for splitting the national carrier into two companies. The privatisation of OGDCL will be taken up on a fast-track basis and would be completed by June 2017.

First Women Bank, House Building Finance Corporation, Pakistan Re-Insurance Company and National Insurance Company have also been included in the privatisation list.