ISLAMABAD   -   Loss-making state-owned enterprises (SOEs) have reported an aggregate loss of Rs905 billion during the fiscal year 2022-23, which is up by 23 percent from the last year.

“Total aggregate profits were Rs703 billion, while loss-making SOEs reported an aggregate loss of Rs905 billion, up 23% from last year. This resulted in aggregate net losses of Rs202 billion, reflecting a 25% increase from the previous year,” Central Monitoring Unit (CMU) of the Finance Division noted in its ‘Aggregate Annual Report Federal State Owned Enterprises (SOEs) financial year 2023’.

The Power sector, particularly on the DISCO side, continued to be dominated by loss-making entities. Aggregate losses on power side totaled Rs304 billion despite the fact that Rs759 billion was spent supporting this sector. Additionally, the infrastructure sector, with high financial costs for entities like NHAs, exacerbated the loss-making scenario, which stood at Rs413.5 billion. Railways also continued to contribute to the rising losses, Rs48.5 billion. Pakistan International Airlines Corporation recorded loss of Rs75.8 billion, Pakistan Steel Mills Corporation (Private) Limited Rs25.5 billion, Pakistan Steel Mills Corporation (Private) Limited Rs17.4 billion, Pakistan Telecommunication Company Limited Rs15.5 billion, Pakistan Post Office Rs3.2 billion and Pakistan Broadcasting Corporation Rs1.6 billion.

In power sector, Quetta Electric Supply Company Limited recorded loss of Rs88.5 billion, Peshawar Electric Supply Company Limited Rs80.6 billion, Lahore Electric Supply Company Limited Rs30.8 billion, Sukkur Electric Power Company Limited Rs30.7 billion, Multan Electric Power Company Limited Rs23.4 billion, Hyderabad Electric Supply Company Limited Rs15.6 billion, Faisalabad Electric Supply Company Limited Rs14.98 billion, GENCO-II: Central Power Generation Company Limit Rs14.2 billion, GENCO-III: Northern Power Generation Company Limited Rs3.2 billion, GENCO-I: Jamshoro Power Company Limited Rs910 million, Islamabad Electric Supply Company Limited Rs666 million and GENCO-IV: Lakhra Power Generation Company Limited Rs480 million.

Aggregate losses of these entities for the past 10 years totalled Rs 5,595 billion. The government of Pakistan provided aggregate support of Rs 1,021 billion in the form of equity injections Rs267 billion, grants Rs 223 billion, subsidies Rs 403 billion, and loans Rs 128 billion to sustain these SOEs and support the economy. However, this support represented more than 10% of the federal budget’s receipts, indicating significant fiscal strain. Various risks were identified within the SOE sector, notably the substantial working capital lock-up due to aged receivables and payables throughout the SOE chain, leading to a circular debt exceeding Rs 4 trillion. Additionally, operational inefficiencies in the power sector continued to negatively impact SOE profitability with spill over effects all across the chain.

Guarantees provided stood at Rs 1,656 billion, while the debt stock reached Rs 3,545 billion, with accrued interest on NHA loans alone contributing more than Rs 1,100 billion. This substantial level of debt and guarantees issued create significant risks for the sector, exposing it to both systemic and unsystemic risks. Systemic risks, such as economic downturns, inflation, and interest rate fluctuations, can exacerbate financial strain on SOEs, making debt servicing more challenging which can be clearly seen in the SOE portfolio. These SOEs contributed to the national exchequer in the form of taxes amounting to Rs 466 billion, a 24% increase. Non-tax revenues, including sales taxes, royalties, and levies collected, amounted to Rs 952 billion, up 58%. Dividends contributed Rs 63 billion, marking a 43% increase.

Meanwhile, according to the report, there are 15 PESs, which have recorded profit Rs703.3 billion during the fiscal year 2022-23. Oil and Gas Development Company Limited recorded profit of Rs224.6 billion, Pakistan Petroleum Limited Rs97.2 billion, Pak Arab Refinery Company Rs66.6 billion, National Bank of Pakistan Rs53.3 billion, Government Holdings (Private) Limited Rs49.2 billion, National Power Parks Management Rs44.9 billion, Pakistan National Shipping Corporation Rs30 billion, Port Qasim Authority Rs28.8 billion, Gujranwala Electric Power Company Limited Rs22.88 billion, Pak Kuwait Investment Company (Private) Limited Rs20.3 billion, State Life Insurance Corporation Rs14.7 billion, National Transmission and Despatch Company Rs11.7 billion, Sui Northern Gas Pipelines Limited Rs8.4 billion, Water and Power Development Authority Rs7.5 billion and Tribal Electric Supply Company Limited Rs7.1 billion.

Moving forward, on the corporate governance front, there is a critical need for more independent and technically qualified directors to ensure effective governance and robust monitoring criteria to maintain a streamlined tone at the top. C-level appointments should be more rigorously scrutinized, with a focus on bringing in experienced professionals. Business plans need better integration with dynamic business models to enhance effectiveness and adaptability & PSO obligations should not be mixed with operational inefficiencies. “The government is also conducting a thorough assessment and valuation of all SOEs, establishing a robust regulatory framework for the privatization and PPP processes, engaging with key stakeholders to build consensus and address concerns, developing a comprehensive risk management strategy, and implementing a robust monitoring and evaluation system to track progress and ensure the intended objectives are met”, it noted. By implementing these steps, the government aims to create a more efficient and competitive economic environment, reduce fiscal pressures, and enhance the overall performance of the country’s economy. This approach is expected to attract private sector investment, drive economic growth, and improve the delivery of public services.