Once again PSEs under the spotlight

In the 4th year of its tenure, the PTI government has diverted its focus to privatisation of Public Sector Enterprises (PSEs). The rhetoric however is much the same as it was in the past. In a yet another meeting of Federal Minister for Privatisation, Muhammad Mian Soomro, with the Prime Minister early this week, he briefed him on the current status of privatisation of different bodies and also updated him on the encouraging results of the ongoing road-shows aimed at attracting foreign investors to Pakistan Steel Mills (PSM). Prime Minister Imran Khan directed the minister to ensure transparency in the entire privatisation process of various public entities.

The privatisation of PSEs has never been seriously and effectively pursued by any of the past three governments. The best chance was during the tenure of Pervez Musharraf. The then government had been much sheltered from political influence and vote politics of appeasement. The enabling environment for privatization was never so encouraging. Shaukat Aziz, the then Prime Minister, being from the private sector, well understood the dynamics of a free market where price, quality of service, profitability and return on equity are the determining parameters of a business enterprise. Among other PSEs, PIA, Pakistan State Oil (PSO) and Pakistan Steel Mills (PSM) were set to be privatised. At the very last moment, the privatisation plans of PIA and PSO were shot down by the powerful hands in the government hierarchy. According to them, the two entities are inseparable public assets of strategic value to the country. Whereas, privatisation of PSM was thrown off the rails by the Iftikhar Chaudhry-led Supreme Court. Whatever may be the strategic value of these entities, the fact remains that the losses incurred by these entities, year after year, have dented the nation's economy.

The banner of privatisation was passed on to PPP that opted to sleep on it. The PPP's third tenure (2008 to 2013), like the first, subjected the nation to the influx of IPPs, including rental IPPs, whose financial consequences are still being borne by the nation.

The PML-N government started on a promising note on the privatisation of PSEs, notably, the much-needed privatisation of loss-making Power Distribution Companies (Discos). Much good work was done in this regard but the privatisation process extended into the 4thyear of its tenure. It lost steam due to the approaching election year's 'compulsions'. Violent protests by the PIA trade unions against its sell-off plans put the government on the back foot and the entire process of privatisation was aborted, much to the chagrin of the IMF that had made privatisation of loss-making PSEs a key condition of its programme.

The PTI government took a different turn on the privatisation of PSEs. It opted to place them all under an entity named 'Sarmaya Pakistan' and under its framework restructure and transform loss-making PSEs into profit-earning units. This did not work out either.

After three years, the government has displayed the banner of privatisation and is working on the outright privatisation of PSEs on public-private partnership (PPP) basis with management control resting with the private sector. So far, nothing tangible has been achieved by the Privatisation Commission. This is PTI government's 4th year of its ongoing five-year tenure. Not much, therefore, can be expected to be achieved in the remaining period of its tenure or ahead of the 2023 general elections insofar as privatisation of PSEs is concerned. That privatisation of PSEs in Pakistan is a formidable task is a fact. The hidden hands within the government hierarchy and those outside support the status quo.

The ground reality is that PIA is incurring a loss of around Rs 50 billion a year (loss of Rs 25 billion from 01 Jan 2021 to 30 June 2021), the accumulated losses of PSM since 2009 have soared to Rs 189 billion and power sector circular debt ballooned to 2.4 trillion plus capacity payment of over Rs 1.0 trillion in 2020 to IPPs by the end of 2020.

What a criminal waste of public money! This is the state of affairs of a country that often goes to the IMF and other global lenders because of flawed policies, rampant corruption and the near absence of accountability.

(The writer is a former President, Overseas Investors Chambers of Commerce and industry)

Copyright Business Recorder, 2021