Political meddling drives USC to verge of closure
Lack of internal control, static business model also blamed for poor performance
The current PTI govt has expressed the resolve to transform USC into a progressive and profit-making commercial enterprise by re-orienting its financial supply line with the help of a consortium of banks. PHOTO: FILE
ISLAMABAD:
Political interference, lack of internal control and a static business model have brought Utility Stores Corporation (USC) - a state-run store chain set up with the aim of providing essential commodities at lower prices to poor consumers - to the verge of closure.
In a report submitted to the Economic Coordination Committee (ECC) recently, the Ministry of Industries and Production pointed out that USC had started its operations with a lean structure, but “now it has turned into a gigantic organisation, which challenges its very existence as a viable business concern”.
“Over a period of time, USC has become a bloated organisation due to political interference, lack of internal control and a static business model,” the ministry said, adding that these issues had brought USC to the verge of closure.
“Today, the balance sheet of USC depicts its terminal health condition with accumulated losses of Rs11.3 billion as on January 31, 2019,” the ministry revealed in its report.
The ministry was of the view that exorbitant tax rates were adding to the misery of USC, which faced competition either with Canteen Stores Department or multinational companies, but they were running operations based on economies of scale and offering goods to consumers at competitive rates.
The current Pakistan Tehreek-e-Insaf (PTI) government has expressed the resolve to transform USC into a progressive and profit-making commercial enterprise by re-orienting its financial supply line with the help of a consortium of banks including National Bank of Pakistan, instead of doling out regular subsidies.
The government also wants USC to identify its target population that needs support in terms of commodities at lower prices modelled on the Benazir Income Support Programme (BISP).
In line with that objective, the Ministry of Industries revealed that a revival plan had been prepared. Apart from that, technological innovations in the shape of integrated Enterprise Resource Planning (ERP) system were required for better internal control and inventory consolidation, the ministry suggested, adding that structural changes in USC were also envisioned in order to make it competitive in the market.
During discussions in an ECC meeting, it was noted that the Ramazan Package 2019 had been approved for USC with a view to providing relief to the poor in the form of subsidised commodities during the holy month.
The Ministry of Industries told the ECC that USC was facing difficulties in the way of procuring goods approved for the Ramazan package due to liquidity crunch. At least Rs5-6 billion was required for the purpose whereas the Finance Division had released 75% of the total subsidy of Rs2 billion.
The ECC was of the view that financial support for USC was essential for a successful implementation of the Ramazan package. It directed the Finance Division to provide sovereign guarantee to a financial institution which would help USC to implement the Ramazan package.
USC decided in 2007 to expand operations by opening more outlets across the country. It vastly increased the number of stores from 20 to 5,000 by the end of 2007. At present, USC has 3,900 stores and 130 warehouses across the country and has 13,000 employees.
Published in The Express Tribune, April 19th, 2019.
Political interference, lack of internal control and a static business model have brought Utility Stores Corporation (USC) - a state-run store chain set up with the aim of providing essential commodities at lower prices to poor consumers - to the verge of closure.
In a report submitted to the Economic Coordination Committee (ECC) recently, the Ministry of Industries and Production pointed out that USC had started its operations with a lean structure, but “now it has turned into a gigantic organisation, which challenges its very existence as a viable business concern”.
“Over a period of time, USC has become a bloated organisation due to political interference, lack of internal control and a static business model,” the ministry said, adding that these issues had brought USC to the verge of closure.
“Today, the balance sheet of USC depicts its terminal health condition with accumulated losses of Rs11.3 billion as on January 31, 2019,” the ministry revealed in its report.
The ministry was of the view that exorbitant tax rates were adding to the misery of USC, which faced competition either with Canteen Stores Department or multinational companies, but they were running operations based on economies of scale and offering goods to consumers at competitive rates.
The current Pakistan Tehreek-e-Insaf (PTI) government has expressed the resolve to transform USC into a progressive and profit-making commercial enterprise by re-orienting its financial supply line with the help of a consortium of banks including National Bank of Pakistan, instead of doling out regular subsidies.
The government also wants USC to identify its target population that needs support in terms of commodities at lower prices modelled on the Benazir Income Support Programme (BISP).
In line with that objective, the Ministry of Industries revealed that a revival plan had been prepared. Apart from that, technological innovations in the shape of integrated Enterprise Resource Planning (ERP) system were required for better internal control and inventory consolidation, the ministry suggested, adding that structural changes in USC were also envisioned in order to make it competitive in the market.
During discussions in an ECC meeting, it was noted that the Ramazan Package 2019 had been approved for USC with a view to providing relief to the poor in the form of subsidised commodities during the holy month.
The Ministry of Industries told the ECC that USC was facing difficulties in the way of procuring goods approved for the Ramazan package due to liquidity crunch. At least Rs5-6 billion was required for the purpose whereas the Finance Division had released 75% of the total subsidy of Rs2 billion.
The ECC was of the view that financial support for USC was essential for a successful implementation of the Ramazan package. It directed the Finance Division to provide sovereign guarantee to a financial institution which would help USC to implement the Ramazan package.
USC decided in 2007 to expand operations by opening more outlets across the country. It vastly increased the number of stores from 20 to 5,000 by the end of 2007. At present, USC has 3,900 stores and 130 warehouses across the country and has 13,000 employees.
Published in The Express Tribune, April 19th, 2019.