Governance through companies

It is argued that there is no motivation for civil servants to work hard for long hours while working on meagre salary

A privatisation of sorts of the civil administration is underway in Punjab as the provincial government is increasingly transferring its functions and those of local governments to newly-created limited companies, registered with the Securities and Exchange Commission of Pakistan under the Companies Ordinance of 1984. During the last eight years of the PML-N rule in the province, Punjab has set up more than a dozen new limited companies for this purpose. Civil servants, known for being malleable to the incumbent rulers, have been hired on magnificent salaries to head these government-owned companies with boards of directors stacked with friends of the rulers and members of the ruling party.

The financial rules and regulations that govern the normal government departments do not apply to these companies though they are dealing with public funds worth tens of billions of rupees. The advocates of government-owned limited companies argue that they help execute tasks on a fast-track basis by cutting the red-tape of bureaucratic approvals. The government-owned limited companies include South Punjab Forest Company, Punjab Health Initiative Management Company, Punjab Power Development Company, Quaid-e-Azam Thermal Power Limited, Quaid-e-Azam Solar Power (Pvt) Ltd, Quaid-e-Azam Hydel Power (Pvt) Ltd, Punjab Municipal Development Fund Company, and Management Company, Punjab Saaf Pani Company, Lahore Waste Management Company (there are seven such companies in large cities of the province), Punjab Agriculture and Meat Company, Punjab Bio Energy Company Ltd, Punjab Mineral Company, Punjab Land Development Company, Punjab Industrial Estates Development Company and so on.

The officers serving in these companies get incentives in the form of attractive compensations, normally 10-15 times higher than their normal salaries. For example, the civil servants serving in energy companies of the Punjab government are drawing Rs1.5-2 million per month in salaries compared to salaries of around Rs150,000 to 200,000 for grade-21 and grade-22 officers. The legality of a higher salary to a serving civil servant as an executive officer of a limited company is questionable. Under the official rules, a civil servant deputed in a government-owned company is only entitled to a deputation allowance, which amounts to around Rs6,000 and cannot receive higher emoluments. Some blue-eyed officers of the rulers are simultaneously enjoying perks and privileges of being CEOs of these companies as well as government servants.

It is argued that there is no motivation for civil servants to work hard for long hours while working on a meagre salary of a government officer. A higher monetary reward at par with the corporate sector induces a civil servant to work harder for the timely completion of projects. This argument, however, ignores a surfeit of perks and privileges high-ranking bureaucrats enjoy in the form of government-owned vehicles, fuel, government residences and an army of servants at their disposal plus discretionary funds. The creation of limited companies can be justified in certain areas of public interest where the private sector is not putting its money, such as the establishment of industrial estates like the Sunder estate near Lahore. But once such estates are developed and the objective achieved, the government should ideally disinvest the industrial estate company to stakeholders and withdraw public funds from it.

However, the idea has been stretched too far in Punjab where even normal government functions like provision of clean drinking water, upkeep of forests and the disposal of waste and provision of health services have been transferred to these companies. This approach smacks of an effort on the part of the rulers to bypass established rules and regulations, and financial discipline. Huge amounts of money and contracts are involved in each case.

The rules of Public Procurement Regulations Authority do not apply to these companies though they are created and run with public funds; they are also free from the accountant general's and auditor general's oversight as their accounts are audited by chartered accountants. All seven waste management companies are annually receiving funds from the province and municipal governments, but are free from official financial discipline. Some of these companies have enacted contracts with Turkish firms on a government-to-government basis. These contracts thave then been sublet to hand-picked local firms without open biddings. The provincial finance department has been forced to provide interest-free loans in the name of bridge financing to some of these contractors working for government-owned limited companies.

Above all, these limited companies have undermined whatever little authority local governments have been vested with under the new local body system. They have snatched different functions of municipal authorities like waste management, provision of clean drinking water, cattle markets and so on. Independent authorities, such as the Lahore Development Authority and its likes are already outside the ambit of municipal governments. The transfer of functions of the civil administration to limited companies on a wide scale implies an expression of no-confidence in the civil service and the normal system of governance. Instead of reforming the civil service and making it efficient and responsive to modern requirements, our rulers have found a shortcut in the form of limited companies to achieve their goals.

Published in The Express Tribune, August 23^rd, 2016.

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