The government has decided to replace the incumbent Chief Executive Officers (CEOs) and Boards of Directors (BoDs) of eight public sector enterprises (PSEs), some of which are near bankruptcy, sources in Finance Ministry told Business Recorder.
The decision was taken by the Cabinet Committee on Restructuring (CCoR), constituted by the Cabinet in its meeting on December 16, 2009, while discussing austerity measures. The committee was headed by the then Finance Minister, and Minister for Law, Minister for Privatisation, Minister of State for Finance and Deputy Chairman of Planning Commission were members.
The mandate of CCoR is to restructure eight PSEs, namely, Pakistan International Airlines (PIA), Pakistan Steel Mills (PSM), Pakistan Electric Power Company (Pepco), Pakistan Railways, National Highway Authority (NHA), Trading Corporation of Pakistan (TCP), Pakistan Agriculture Storage and Services Corporation (Passco) and Utility Stores Corporation(USC).
Sources said that a meeting of the CCoR was held in the Finance Ministry on February 8, 2010 under the chairmanship of Shaukat Tarin. The committee deliberated on a framework for restructuring of PSEs and decided to co-opt the concerned Ministers in deliberations regarding PSEs' working under their Ministries, in order to facilitate the much desired restructuring effort.
Provincial representation would also be ensured in deliberations regarding Pakistan Railways and Pepco, both being the declared mandate of the Council of Common Interests (CCI) under article 154 of the constitution. Sources said the committee agreed that the under-performance and inefficiency in the working of the PSEs was largely due to weak governance, susceptibility to outside interference, implicit government guarantee and overall deficient corporate governance structures.
It was decided that the first task at hand was to stabilise the PSEs in order to curtail the haemorrhaging and the fiscal burden on the exchequer and ideally move to a structural surplus and increased public sector savings. The Minister for Privatisation apprised CCoR regarding the interest of the financial institutions for investment in privatisation of oil, gas and energy sectors.
He suggested that the potential privatisation ventures may be included in the discussion of CCoR. Tarin had mentioned that the mandate of the CCoR was to initially restructure the eight PSEs. He suggested that privatisation of other entities was outside the purview of the CCoR.
He re-emphasised the need to improve the working of the eight PSEs as they require immediate attention and endorsed the following framework in this regard: ( i) Stabilise PSEs through a restructuring model; (ii) subsequently examine strategic sale of 26 percent shares in public private partnership (PPP) model and (iii) 74 percent ownership to remain in government control for future consideration.
Sources said that the CCoR has finalised the following roadmap in order to proceed with the restructuring effort: (i) Formation of an independent and professional Board of Directors (BoD) by March 30, 2010 in each PSE; (ii) hiring of professional CEOs (nominated by the respective BoD) by May 30, 2010; (iii) approval of restructuring plans of respective PSEs by CCoR by August 31, 2010, and; (iv) start implementation of the approved restructuring plans under the new independent BoD by September 1, 2010.
Sources said that CCoR decided to seek approval of the Prime Minister, who now also holds the portfolio of Finance Minister, for the proposed roadmap for restructuring PSEs. Finance Ministry had submitted a summary to seek approval of the Prime Minister to authorise CCoR for finalisation of BoDs of PSEs and for the roadmap for restructuring of PSEs. The Prime Minister has directed the Finance Ministry to table the issue before the Cabinet.