This is a pretty damning review of the Public Sector Corporations in Pakistan; some of the facts surprised me..any comments?
http://www.brecorder.com/story.php?css=brecord.css&story=0000668251&m=0&s=0
AHMED MUKHTAR
ISLAMABAD (November 29 2002) : In the first quarter of 2002-03 except PIA all the public sector organisations remained in loss. The loss of the Pakistan Railways was Rs 840.75 million against its target of Rs 1.25 billion. Pakistan Steel had the net loss during the quarter stood at Rs 20 million as against projected net loss of Rs 56 million.
PIA showed a profit of Rs 853 million, while net loss before tax of KESC was Rs 3.393 billion against target of Rs 3.247 billion. During the first quarter actual line losses were 25.6 percent.
In the Pakistan Railways the main shortfall ie Rs 99.545 million in revenue is in Military Traffic, which has been handled less than the estimates. The Marketing Directorate has geared up its activities and made up the previous deficiency in the 2nd quarter. It is hoped that the PR will achieve the revenue targets during 2002-03.
Quarterly Review (July-September) FY 2002-03
Main Assumptions Vs Actual: Water and Power Development Authority (Wapda) revised its financial projections after incorporating structural tariff increase of 6.6 percent with effect from August 13, 2002. During the first quarter, the actual energy generation was 18204 Gwh as against projected 17479 Gwh, which means increase of 4.1 percent.
The generation mix improved with increased share of hydel generation bringing down the share of thermal to 49.9 percent from 53 percent. The hydel generation increased by 898 Gwh than target of 8221 Gwh. Wapda thermal Generation went down by 242 Gwh and IPPs purchases went up a little by 69 Gwh against the target of 4557 and 4681 Gwh respectively.
The public sector receivables are increasing constantly. Fata the major defaulter in public sector stood at Rs 19.146 billion at the end of the first quarter against Rs 15.425 billion as on June 30, 2002 thus up by Rs 3.721 billion. This shows that Fata has not been clearing its current bills and past arrears as well. It is worth mentioning here that the accumulation of receivables at such a pace may cause serious liquidity problems in future and oversight of this area may show disastrous results at the end of current financial year.
KESC did not pay its current bills during the first quarter while their past dues stood at Rs 5.365 billion. Moreover, (in addition to the above), Wapda also provided subsidy of Rs 384 million to Agriculture Tube-wells in Balochistan and Rs 935 million to AJ&K.
Arrears of gas and IPPs supplies were reduced by Rs 8.182 billion by diverting cash flows during the first quarter to bring them down to the normal level. Non payment of dues by the public sector during the first quarter coupled with carried over financing gap of Rs 8.824 billion for the FY 2001-02 caused maximum strain on Wapda finances. As against Rs 11.5 billion financing gap at the end of the fiscal year 2002 to be determined by the GoP no amount could be arranged to meet the gap.
Total cash collection: Total cash collection was Rs 52.116 billion exclusive of GST less by Rs 6.413 billion than the target of Rs 58.529 billion. The decrease in collection was mainly attributed to drop in operating revenues and less recovery of receivables from the public sector. Despite increase in units sold by 1.8 percent than the level set for first quarter, the operating revenue decreased by Rs 987 million than the projection of Rs 55.314 billion. Change in the consumer mix with more sales to subsidised categories of consumes caused less operating revenue.
The actual receipts of Rs 2.184 billion on account of non-operating revenue is above the target of Rs 716 million. The receivables have increased by Rs 8.195 million as compared with the projected level of Rs 39.909 billion mainly due to Public sector default, which hampered liquidity position significantly as is evident from the following table:
Total cash outflows: The actual total cash outflow for the first quarter was Rs 42.05 billion less by Rs 5.498 billion mainly due to deferment of hydel profit payment to NWFP and Debt service to the GOP. Effective control on O&M expenses resulted in reduced expenditure by Rs 677 million during the first quarter of current financial year.
Explanatory note to the FIP of KESC and its Performance during the first quarter (July-September, 2002): The FIP of KESC was prepared in the background of the GoP plan to privatise it by September 2002 to a party ready to invest around US$ 400 million for improvement of the network and convert KESC into a self-sustaining profitable organisation.
All necessary actions were completed to privatise it but the objective could not be achieved for many reasons mainly due to absence of interested parties in the post September 11, 2001 scenario. KESC is still on the privatisation list and efforts will continue for its sale.
However, without waiting further for successful outcome of the privatisation process and assuming that KESC will continue to remain in public sector, it was decided in September 2002 to evolve a strategy to invest the required funds and turnaround KESC into a profitable organisation, like many other public sector entities, in the next three years.
Implementation Plan: 5. The targets fixed for the FIP are in fact ambitious and require continuous dedicated efforts at all level in KESC. Realising the importance of the plan and the fact that survival of KESC depends on the same. A dedicated team of senior management/engineers of KESC has been assigned the responsibility of implementation of the plan.
It would be ensured by the team that the funds received during plan period are effectively utilised to achieve the targets. Action plans have already been made. Initial steps to quantify the T&D losses at each point from generation to distribution have been taken and the metering of transformers, feeders and PMTs is already under progress.