Pakistan approves PKR 30.2 billion for utility stores closure, ensures worker compensation

The Economic Coordination Committee (ECC) of the Cabinet on Thursday approved a PKR 30.216 billion technical supplementary grant to facilitate the orderly closure of the Utility Stores Corporation (USC), marking the final phase of winding down one of the country’s longest-running state-owned retail networks.

The decision, taken at a meeting chaired by Finance Minister Senator Muhammad Aurangzeb, aims to responsibly address USC’s mounting financial losses while ensuring severance and compensation for affected employees.

According to the Ministry of Finance, the package includes payment of outstanding dues, severance benefits, and compensation under a Voluntary Separation Scheme (VSS), protecting workers from abrupt job losses as the state exits the retail sector.

The ECC directed the Ministry of Industries and Production to further rationalize closure-related expenses and dispose of USC’s assets—including properties—within the current fiscal year to partially offset the cost of closure.

Officials emphasized that the closure must be handled in a transparent and accountable manner, with particular attention to the sale of assets and settlement of liabilities.

A Costly Burden

Established in 1971 to supply essential food items at subsidized rates, USC had become a major fiscal burden in recent years. The corporation posted losses of PKR 16 billion in FY25 and PKR 15.5 billion in FY24, with accumulated losses reaching PKR 23.8 billion by Jun-25.

Despite receiving heavy government subsidies and undergoing a major expansion in 2007, USC began recording sustained losses after 2013, eventually leading to its placement on the privatization list in Aug-24.

Subsidies were withdrawn the same month, and a rightsizing plan was implemented in Dec-24. The number of stores was reduced from 3,742 to 1,904, and the workforce was cut from 11,614 to 7,710 by February. However, projected annual losses still exceeded PKR 8.3 billion.

Closure Timeline

On June 28, 2025, Prime Minister Shehbaz Sharif was presented with two options: continue operations with a PKR 14 billion bailout, or approve full closure. He opted for closure by July 31 and tasked the finance minister with overseeing the process.

The USC board formally endorsed the decision on July 02, and within two weeks, over 1,000 rented stores and 1,230 franchise outlets were shut down. USC ceased nationwide operations on July 31 and has since been transferring remaining stock to warehouses.

Transitional Operations

The Finance Division confirmed that USC will retain 832 employees between September and November 2025 at a monthly cost of PKR 210 million to manage warehouses, audits, and litigation. From Dec-25 to Jun-26, the workforce will be reduced further to 326 employees, costing PKR 115 million per month, to oversee property disposal and residual administrative tasks.

The ECC meeting was attended by the Federal Ministers for National Food Security, Commerce, and Power, as well as the Special Assistant to the Prime Minister for Industries and Production, and senior officials from relevant ministries and departments.

The government said the financial package reflects its commitment to fiscal responsibility while upholding its obligation to protect workers’ rights during the final phase of USC’s operations.