Unbundling plan
The government has announced it will unbundle several state-owned enterprises that have been bleeding state coffers dry for decades. Chief among these will be Railways, PIA and Pakistan Steel Mills. Private sector entities will come in to help run these businesses, but questions remain over how anyone will turn them around without some extreme measures.
Under the plan, Railways will be split up into a regulatory body, track and infrastructure companies, a freight service, and private passenger services. While allowing private competition on the lines may help improve service quality and utilisation while lowering prices, the parts that the government is keeping control of still mean that major reforms will be needed. Since 1947, Pakistan has failed abysmally at adding track length or improving the quality of the rail network. Price was among the factors. It is unlikely that private parties would want to invest in better carriages or engines when the infrastructure is lacking.
The plan for PSM also involves splitting the company and offering its bloated employee base voluntary separation. But PSM’s problems are far greater than overstaffing. Even at its peak, the company was not competitive and, like much of our heavy industry, relied on government subsidies and import tariffs to survive. Alternatively, the company could be sold off without any guaranteed protection, which might actually be better for the government and the economy, but not for sale prospects.
Meanwhile, PIA would see its staff halved, some related operations outsourced, and several routes closed. But even then, the government also plans to invest heavily in a new fleet, which would cancel out any benefits of downsizing. At present, only a few dozen state-owned airlines remain. Only a handful are profitable, while most of the others are owned by wealthy countries. PIA’s domestic utility is also questionable at best. While it does connect a few far-flung areas, most people still prefer to travel by road due to the lower prices. Vanity is keeping the airline under government control, and bankrupting us all.
Published in The Express Tribune, November 25th, 2020.
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