What actually ails PSEs?

Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi in response to a motion by Senator Taj Haider of Pakistan People's Party said that the objective of the government's announcement transferring Pakistan Steel Mills (PSM) land to Sui Southern Gas Company Limited (SSGCL) was to retire its 37 billion rupees outstanding dues. He acknowledged that there has been no specific development on the land transfer; and then proceeded to accuse the former PPP-led coalition government of being responsible for losses to the tune of 104 billion rupees.
Sadly, state-owned entities (SOEs) as well as autonomous bodies continue to be subjected to poor governance, be it the period of assessment during the former PPP government or the incumbent PML-N government. The problem lies with the selection process of senior management that is not through any independent selection panel with integrity, as suggested by the Supreme Court. Initially the incumbent Prime Minister Nawaz Sharif followed the orders of the court and established a panel of three men with integrity, however, as and when the panel suggested a name different from the one supported by the Prime Minister the recommendation was not accepted. Eventually the panel members resigned and left the field open for unilateral executive decisions on key positions in SOEs and autonomous entities. This, critics argue, is one of the major reasons for the failure of the government to improve governance and the frequent legal challenges to senior appointment decisions in courts of law as the example of the Pakistan International Airlines Chairman indicates.
The case of PSM is slightly different for two reasons. First, the Mills was established through what was considered at the time as a diplomatic coup by Zulfiqar Ali Bhutto through his skilful development of Soviet interest in setting up a plant in this country. Subsequently, the PPP leaders have not only expressed their pride in Bhutto's achievement but have also used the PSM as a recruitment centre for their loyalists. The resultant high costs of production have made this an unattractive acquisition for the private sector if that is the high valued land that the Mills own is set aside. In this context, if the land is to be used to retire its debt to SSGCL, as announced by the federal government, then the attractiveness of the Mills to a prospective private sector buyer would be next to zero. A recent offer to a Chinese company to purchase and/or run the Mills was rejected on grounds that the manpower to output ratio was simply too high in the Mills. To appease the PPP and at the same time to withdraw from any responsibility towards meeting the bulk of its operating costs the Sharif administration offered the Mills to the Sindh government - an offer that has not yet been responded to leading many to doubt the provincial government's interest in this acquisition.
To conclude, autonomous entities and SOEs must first be restructured and a more thought out plan for sale of assets must be developed rather than a knee-jerk statement that land would be used to clear outstanding dues. And emphasis must be on an independent panel with integrity to make appropriate selections of senior management.
According to the 8th mandatory quarterly review under the 6.64 billion dollar Extended Fund Facility, the International Monetary Fund specified that the government is committed to the strategic and asset sale of PSM by end March 2016. A strategic investor would be unlikely to be attracted to the purchase of the PSM without the assets, particularly land, and given the opposition by the PPP as well as the staff to the sell-off a three-month period is simply unrealistic.
And secondly, Shahid Khaqan Abbasi is correct in his statement that the Mills suffered massive losses during the previous government which can partly be attributed to corruption and partly to poor management. But while the losses during the PPP-led coalition government were high requiring massive bailout packages, yet the Sharif administration has also failed to make any headway in improving governance in PSM. The incumbent PSM CEO's initial assertion that he would be able to attain a capacity output that he was subsequently unable to, and with the government's refusal to extend bailout packages other than to clear wages backlog periodically, the Mills has all but ceased operations. With zero operational income the outstanding bills, including wages, are accumulating.