Pakistan state-owned enterprises report PKR 408 billion loss in second half of 2023

Pakistan's state-owned enterprises (SOEs) reported a cumulative loss of PKR 408 billion for the six months from July to December 2023.

According to the "Bi-Annual Report on SOEs Fiscal Year 2024" released by the Central Monitoring Unit (CMU) of the Finance Division, excluding PSWF entities, the net aggregate loss stands at PKR 147 billion.

The report highlights significant losses among various SOEs, with the National Highway Authority (NHA) leading at PKR 151.3 billion, followed by QESCO at PKR 56.2 billion, and PIA at PKR 51.7 billion.

Other notable losses include PESCO at PKR 39 billion and Pakistan Railways at PKR 23.6 billion. Additional entities such as SEPCO, Pakistan Steel Mills Corporation (Private) Limited, and IESCO reported losses of PKR 20.9 billion, PKR 14.4 billion, and PKR 12.1 billion, respectively.

The Central Power Generation Company Limited (GENCO-II) reported a loss of PKR 8.3 billion. Other loss-making entities include PTCL with PKR 7.7 billion, Pakistan Post Office with PKR 5.5 billion, and several electric supply companies.

These losses illustrate widespread inefficiencies and operational challenges within the SOE sector.

Since 2014, SOEs have accumulated losses totaling PKR 5.9 trillion.

On the positive side, the top 15 profit-making entities for the six months of July-December 2023 demonstrated strong financial performance.

OGDCL led with a profit of PKR 123.2 billion, followed by PPL with PKR 68.7 billion, and National Power Parks Management with PKR 36.2 billion.

Other significant contributors included PARCO with PKR 35 billion and Government Holdings (Private) Limited with PKR 32.5 billion. Additional profitable entities included NBP with PKR 26.6 billion and the Port Qasim Authority with PKR 8.4 billion.

The report states that the government of Pakistan extended fiscal support totaling PKR 436 billion over the six-month period ending December 2023 to support these losses.

This support was divided into PKR 120 billion in grants, PKR 231 billion in subsidies, and PKR 85 billion in loans.

SOEs contributed PKR 200 billion in taxes, reflecting a 14% decrease compared to the previous six months. Meanwhile, non-tax revenues, including sales taxes, royalties, and levies, amounted to PKR 349 billion, representing a 27% decline.

Dividends provided were PKR 9 billion, a significant 71% decrease. These declines highlight fiscal pressures on the government's revenue streams from the SOE sector for the first six months of FY 2024.

The SOE sector faces liquidity issues caused by a working capital lock-up due to prolonged aged receivables and payables within the supply chain.

This has led to pronounced circular debt, quantified at PKR 3,447 billion on a gross basis and PKR 2,800 billion on a net basis, primarily arising from inefficiencies within the power sector, particularly the Distribution Companies (DISCOs).

The entrenchment of circular debt has adversely impacted the financial health of otherwise strong entities such as GHPL, OGDCL, PSO, and PPL.