Public sector money drains

Power distribution companies, however, do not necessarily get same leeway

The Finance Ministry’s recent report on state-owned enterprises mostly confirms widely held beliefs about the mismanagement and corruption in these companies, but parts of the report still surprised readers. Perhaps the biggest surprise was that the biggest lossmaker for the fiscal years 2021 and 2022 was the National Highway Authority (NHA) and not PIA, Pakistan Steel Mills or any power distribution company (Disco). However, seven of the top ten lossmakers were discos — PIA only came in sixth.

But it is important to acknowledge that NHA is an infrastructure company and its losses are by design. Although it does collect tolls and other revenue, it undertakes many commercially unviable projects, including the road network in Balochistan and other critical but unprofitable roads. Like Pakistan Post, the goal vs-a-vis the NHA is not to make it profitable, but only to reduce losses by ensuring efficiency.

Power distribution companies, however, do not necessarily get the same leeway, as their losses are attributable to failure to collect payment for a commodity they have already sold, and the ‘selling prices’ already incorporate pro-poor subsidies. The same is true for PSM and PIA, which are supposed to be profitmaking, or PTCL which, despite being run by the Emirati telecom giant Etisalat for two decades since its partial privatisation, continues to rely on government support.

In fact, the only profitable companies are in the oil and gas sector, a market area where even the worst-managed public and private sector companies usually make money. Their profitability should thus not be confused with efficiency. A cursory look at some companies shows they have the same problems as other SOEs, such as overstaffing and political interference. Unfortunately, governments usually go out of their way to suggest that PIA and PSM are the sources of all problems and ignore the others when it comes to reforms or privatisation. Without ignoring PIA and PSM, the government should also focus on wider reforms to improve SOEs’ performance, especially those that cannot or should not be privatised.

Published in The Express Tribune, January 2^nd, 2024.

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