In a rare statement, a cabinet body on Friday admitted that poor governance concerns persisted with low transparency in government-owned companies while their cumulative losses increased further to a record Rs5.9 trillion by December last year.
The statement issued by the Ministry of Finance after a meeting of the Cabinet Committee on State-Owned Enterprises (CCoSOEs) appeared to be a serious charge sheet about the poor performance of SOEs during the July-December 2024 period of the current fiscal year, particularly the power sector performance.
The energy-sector circular debt, comprising power and gas, jumped to Rs4.9 trillion by December last year.
"Governance concerns persist, with low levels of transparency in beneficial interest disclosures under Section 30 (of the SOEs Act) and other compliance gaps," stated the Ministry of Finance. Finance Minister Muhammad Aurangzeb chaired the meeting.
The statement added that "the lack of strategic alignment in business plans and operational inefficiencies across SOEs were identified as critical areas requiring urgent reforms".
Muhammad Aurangzeb reaffirmed the government's commitment to strengthening the governance, operational efficiency and financial sustainability of key public sector entities, it said. The finance minister stressed the importance of aligning business plans with national priorities and addressing operational challenges in a timely and coordinated manner.
The cabinet committee reviewed the performance of government entities during the first half of current fiscal year, which also coincided with the first year of the government of Prime Minister Shehbaz Sharif.
"The cabinet committee noted with concern the staggering cumulative losses of SOEs amounting to Rs5.8 trillion," said the finance ministry. It added that Rs342 billion in additional losses were incurred in just the last six months - equating to a daily loss of Rs1.9 billion.
Aurangzeb "emphasised that issues such as inefficiencies in DISCOs' (distribution companies) operations, slow network upgrades by National Transmission and Despatch Company, unfunded pension liabilities and low governance standards continue to erode fiscal space and undermine investor confidence".
The finance minister stressed the importance of timely reforms, particularly in power and energy sectors, where circular debt has crossed Rs4.9 trillion, it added.
The government reiterated the resolve to bring greater transparency, financial discipline and accountability to the SOE landscape.
The finance ministry said that the Central Monitoring Unit gave a detailed briefing on a biannual report on the federal SOE performance covering the period from July to December 2024. The report included a detailed overview of the state of affairs and key challenges confronting state-owned enterprises, including cumulative losses amounting to Rs5.8 trillion, with Rs342 billion being incurred in just six months.
The committee was told that circular debt in oil, gas and power sectors crossed Rs4.9 trillion, severely affecting cash flows and asset valuations.
The government's fiscal support to SOEs – through grants, subsidies, loans and other injections – also exceeded Rs600 billion in six months, equivalent to nearly 10% of total revenue receipts.
In addition, unfunded pension liabilities in DISCOs and other SOEs, estimated at Rs1.7 trillion, remain off the books, as in the case of railways' pension obligations, the meeting was told.
It was highlighted that government guarantees currently stood at Rs2.2 trillion, while rollover costs and financial restructuring liabilities further compound fiscal pressures.
The finance minister emphasised that directors representing the government on boards of SOEs must exercise due diligence and play an active role in safeguarding the financial health and operational performance of the entities through informed and responsible input.
In a recent meeting of the National Assembly Standing Committee on Finance, Muhammad Aurangzeb said that government nominees on SOE boards were performing below requirements and they needed to pull their socks up.
The cabinet committee also approved new nominees on various boards. It approved the appointment of chairman of the Quetta Electric Supply Company (Qesco) board, constitution of the board of directors of the Independent System Market Operator, appointment of independent director/chairman on the board of Gujranwala Electric Power Company (Gepco) and independent director on Genco Holding Company Limited (GHCL).
It approved the nomination of independent directors on the board of Multan Electric Power Company (Mepco), Power Information Technology Company and the constitution of the board of Energy Infrastructure Development and Management Company.
The cabinet body approved the winding up of three subsidiaries of the Ministry of Railways, which included RAILCOP, PRACS and PRFTC.
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