PKR 500bn Annual losses for State Owned Entities: Shamshad

September 22, 2023

During a news conference, Caretaker Finance Minister Dr. Shamshad Akhtar discussed the factors contributing to the significant losses incurred by state-owned enterprises (SOEs) amounting to Rs500 billion. Dr. Akhtar attributed these losses to external interference, inadequate accountability mechanisms, weak management practices, and limited accountability. She emphasized the need for reform in the SOEs sector and outlined the government’s efforts to address these issues.

Dr. Akhtar noted that the government has formulated a comprehensive policy framework for SOEs, which is currently in the finalization stage with input from relevant ministries and stakeholders. She also highlighted the ongoing privatization process for certain institutions.

While acknowledging the vital role played by some SOEs in economic development and public service provision, Dr. Akhtar expressed concerns about inefficiencies within certain SOEs. These inefficiencies, she explained, have resulted in significant financial losses, causing a drain on public resources. Factors contributing to these losses include a lack of autonomy, external interference, inadequate management, and ineffective boards, which lack suitable composition criteria.

The Caretaker Finance Minister stressed the Ministry of Finance’s ultimate responsibility as the owner of these assets and the need to rescue struggling SOEs. Bringing SOEs under the Finance Ministry’s purview was considered crucial to address their financial challenges.

Dr. Akhtar highlighted that SOEs operate across various sectors, including energy, transportation, telecommunications, and banking. Over time, their overall performance has fallen short of expectations.

She also mentioned that the Finance Ministry’s unit would provide updated figures in the coming months. Dr. Akhtar explained that strategic and non-strategic categorizations would be developed by the Finance Ministry in consultation with relevant ministries before going to the cabinet. She mentioned key provisions of the SOEs Act, 2023, including the nomination of independent directors, separation of the office of the CEO, and the critical appointment of CEOs.

Dr. Akhtar announced the federal government’s intention to establish strategic SOEs while phasing out non-strategic ones. She emphasized that ministries would not be allowed to direct the management of SOEs.

Additionally, Dr. Akhtar shared data on the top 10 loss-making government enterprises, including Quetta Electric Supply Company (PKR108bn), National Highways Authority (PKR94bn), Pakistan Railways (PKR50bn), Sukkur Electric Power Company (PKR41bn), PIA (PKR36bn), Sui Southern Gas Pipeline (PKR 21bn), Pakistan Steel Mills (PKR 21bn), HESCO (PKR18bn), Pakistan State Oil Company (PKR15bn), and Peshawar Electric Supply Company (PKR14.6bn), all of which incurred substantial losses in the year 2020. These findings underscored the urgent need for reform in the SOEs sector to mitigate financial losses and improve their overall performance.