Railways, Steel Mills taken off the chopping block
In a major blow to the economic liberals in government, the federal cabinet decided against the privatisation of eight of the largest state-owned companies, including Pakistan Steel Mills.
Information Minister Firdous Ashiq Awan made the announcement after a meeting of the federal cabinet in Peshawar on Wednesday. She said that Prime Minister Yousaf Raza Gilani had decided that the Steel Mills, as well as Pakistan International Airlines and Pakistan Railways, should be restructured and made profitable while remaining within government ownership.
Awan was careful not to name which ministers had initially made the proposals, though it has been previously reported that Finance Minister Abdul Hafeez Shaikh has been advocating privatisation of loss-making state-owned entities as a means of reducing the federal budget deficit.
Shaikh has been quoted in the past as saying that these companies cost the government an estimated Rs250 billion – or about 1.4% of the total size of the economy – in annual bailout costs. PIA alone has lost the government well over Rs100 billion over the last five years and Pakistan Railways has requested about Rs50 billion worth of bailouts in the last two years alone.
At a minimum, Shaikh has insisted that the companies be restructured and run by professional managements (as opposed to civil servants) as a precondition to releasing the bailout funds. Awan announced some measures that would meet that condition.
For instance, she said that the Steel Mills board of directors would be restructured and expanded, from the current nine to twelve members. The government has earmarked about Rs30 billion for the bailout of the ailing company, but the money is expected to be released only after the government announces the appointment of a new CEO, which it is expected to do over the coming week.
Awan also said that the federal cabinet would be meeting more frequently – every week as opposed to every 15 days – and would have the matter of loss-making state-owned companies on its agenda. She also explained the reason for why the federal cabinet met in the provincial capital of Khyber-Pakhtunhwa instead of Islamabad: to recognise the renaming of the province from its previous Northwest Frontier Province.
In what appears to be an unprecedented recognition of minority communities by the government, Awan announced that the provincial governments had been asked to set up Christmas Bazaars to help the Christian community conduct their Christmas shopping by offering reduced prices at the special markets.
Published in The Express Tribune, December 15th, 2011.
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These are not enterprises but vote banks financed by Pakistani tax payer. Get rid of them to the highest bidder so they can be run like an enterprise not a party vote bank
It is questionable whether privatization would have solved the problem for these companies. It would have been hard to find buyers given their bloated headcount and depleted assets. They require restructuring, and that means hard decisions on what to do with excess employees -- unions would have been up in arms if privatization had been agreed upon.
A private company may have been able to cut losses, but let's face it -- none of these are potential cash-cows. Airlines are a bleak business and PIA would have to cut any unprofitable routes to turn a profit. PSM is too small to be viable and has no guaranteed iron ore supply. Railways in private hands would be a political suicide given all the land it owns and the nature of the business.
This is a better and I might even say the right decision, provided a professional management can put the house in order.
It would appear that none of the big shots who would normally cut a deal with the govt and buy at a steep discount thinks these businesses are salvageable - not enough energy to run a steel mill and the railroads are on the brink of collapse.
no railways needed there are many good thing like high speed donkey carts from Leyari and bull carts from india.
It was to be expected that privatization would be shelved as we approach the elections. Whether that is the right decision or not, no one cares.
I have start making plans to get the Tanga back on the road as we will not have gas or oil to run our cars and buses, also hire camels to go abroad as PIA will be grounded, request all my family to be moved in one area as railway will not be running, and build new houses with mud as we will not be getting any steel. In one sense, the government is doing the right thing to shut down everything which we can do with alternative cheaper option. By the way, next election, you will be putting these people back in power.
@jagjit sidhoo: You probably do but your railways is a highly profitable enterprise despite the many political appointments. Our public sector enterprises are loosing massive amounts of money! If the government wants to retain ownership of the PSEs it'll not only have to employ professional managers but also give them the due authority to fire and hire who they choose. Only then will they be able to turn things around.
If we look at the numbers, PIA reported 4 times higher loss in 2010 vs. same period LY & 2 times higher in first quarter 2011 vs. same period 10. Surprisingly, employees head count is static in the three years.
The Govt actually critically needs to figure out the deficit reasons whether causing by corruptions or others facts.
I strongly believe that Railway, PIA & Steel Mill are profitable institutes as marked by other countries like India, Indonesia etc.
Politicians find it easier to milk public sector enterprises as also providing jobs to their near and dear ones we have similar problems in India .
@maz3tt:
They are not interested to destroy them. On the contrary they would like to keep them alive and under their control since they are a dumping ground for political workers. After all they need to draw free salaries from somewhere. Get it? ;)
This government will go down in history as one having worst governance. Economy is in ruins and foreign exchange reserves are fast depleting
"She said that Prime Minister Yousaf Raza Gilani had decided that the Steel Mills, as well as Pakistan International Airlines and Pakistan Railways, should be restructured and made profitable while remaining within government ownership."
That's great, will this miracle happen before the up-coming election?