Failing the PSEs

If there is one area in which the government has utterly failed to bring about any improvement, it is in the state of public-sector enterprises. The last review of the IMF programme, released by the Fund`s staff, points out that the accumulated losses of the three large public-sector companies and the power sector are now greater than the country`s annual development programme. Standing at Rs1.365tr, they can be said to be at record highs today, though this is one record we will not hear the government bragging about. The PML-N came to power promising to rectify the dismal situation in the public-sector enterprises. So what went wrong? Looking at each case, it turns out that the government had neither the political will nor the capacity to undertake such a massive task. The attempted privatisation of PIA was clumsily handled, leading to protest and the eventual unfortunate tragedy amongst the striking workers. The steel mill was supposed to be given to the Sindh government, but that process has been stalled for a number of years now. We stopped hearing about the railways reforms, and now the government is busy pumping billions of rupees into it in preparation for a massive Chinese injection. The power sector has shown improvement in recoveries by five percentage points, and reduction of line losses by one percentage point, and further accumulation in the circular debt has been halted. But it is hard to tell how much of this is because of superior management, and how much due to falling oil prices, rising tariffs and the new policy of recovery-based load-shedding which allocates more power to low-loss areas and dispenses with the need to increase recoveries in high-loss areas.

Admittedly, the pace of increase of these losses has been brought down, but that has not happened by putting them on any sustainable footing or by any strategic reform. It has happened largely through heavy-handed measures, or by passing on a significant portion of the burden to consumers. Nobody is arguing that privatisation is the only way forward, but the government has produced no vision of how to turn this situation around while retaining management control of these entities. This is a massive failure which must be emphasised each time we hear the government brag about accumulating its `record-high reserves` or of having turned the economy around.

Source: Daily Dawn

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