The government has started some concrete measures to improve the performance of eight Public Sector Enterprises. The Cabinet's Committee on Restructuring (CCOR) has identified PIA, Steel Mills, Pepco, Pakistan Railways, NHA, PASSCO, Trading Corporation of Pakistan (TCP) and Utility Stores Corporation (USC) that need improvement of corporate governance, service delivery, reduction of fiscal burden and savings.
The government wants to induct a mix skill including academic management experts and technocrats. For this purpose the government has restructured the board of directors (BoDs) of these PSEs.
Now, the Finance Minister Dr Abdul Hafeez Sheikh wants to induct professional managers including CEOs, DFO and Key Managers to get all these PSEs out of the old-style management. The minister's main emphasise is to improve the governance and performance of the power sector distribution companies (DISCOs), National Transmission and Dispatch Company (NTDC), Pakistan Steel Mills and Pakistan Railways in light of guidelines set by the CCOR.
Now, substantial progress has been achieved, including the restructuring BoDs of nine Power Sector Distribution Companies (DISCOs), National Transmission and Dispatch Company (NTDC), Power Generation Companies (GENCOs), Central Power Purchase Authority (CPPA), Pakistan Steel Mills (PSM) and Pakistan Railways. A framework for hiring of professional CEOs has been approved by the Cabinet Committee on Restructuring (CCOR) of PSEs to create transparency. BODs are being empowered to carry a transparent process and induct professionals from the market. Extensive work is being done on turn-around plans of the PSEs. Turn around plans for PIA, Pakistan Railways, PSM and PSM are under implementation and consequently haemorrhaging has been curtailed in these PSEs.
Pakistan Railways
The CCOR has operationalized a restructuring framework for Pakistan Railways. A new Board of Directors (BoDs) of the PR has been constituted with an optimal mix of academia, management professionals, rail experts and executive functionaries. New BoDs will start working after an amendment of the Railway Order. The process for the recruitment of professional Chief Executive Officer and other technocrats is being undertaken. Repair of locomotives has been prioritised for improving revenue generation and restoration of rail services. Freight operations are being prioritised. It has been decided that adjustment of fares and freight pricing will be determined according to market conditions and cost of doing business. An asset management company is being established for optimum utilisation of PR's assets. Private sector involvement is the focus for moving forward. The Lahore Chamber of Commerce and Industry has been engaged for their freight transportation from Karachi to Lahore. Commercial management of rail operations and outsourcing of non-core functions is being initiated with the aim to improve the efficiency of rail operations. Financial viability is being ensured through improving revenue and support by the Government of Pakistan.
Pakistan International Airlines An overarching restructuring plan of the PIA has been finalised which addresses corporate governance, human resource rationalisation, financial and operational restructuring, engineering improvement, procurement and logistics, marketing and fleet, airport services and dispatch reliability among others. Increased fuel cost has been a major downside risk to the financial strength of the PIA and effective measures have been put in place to mitigate the effect. Various other cost minimisation and revenue enhancement measures have been put in place to reduce the revenue-expenditure gap in the medium term. Fleet renewal and addition is being planned. Route rationalisation, code sharing and alliances are being pursued for moving to a new business model. Dispatch reliability will be improved through various initiatives including expansion of the reliability system, use of reliability tools and standardised data exchange on maintenance. Strategic Business Units (SBUs) are being established for outsourcing of non-core functions of PIA. Rationalisation of employment in the PIA is being addressed through attrition and no new hiring is being undertaken except operational staff. Financial restructuring plan has been finalised which includes equity injection, rollover of loans and government guaranteed loans among others. A holistic view needs to be developed for the revitalisation of PIA entailing industry dynamics, aviation policy and strategic needs which is the focus of the government.
Pakistan Steel Mills BoDs of PSM have been reconstituted. Process for selection of a professional CEO of PSM has been finalised. Immediate financial needs of the PSM have been addressed. The new Business Plan of PSM is focused on the expansion of utilised and potential capacity. Smooth availability of raw materials to the PSM has been ensured. The PSM is now operational with basic support. The new CEO will be authorised to implement a business plan. Strengthened BoD will facilitate implementation with oversight of CCOR. A strategic view needs to be undertaken for sustainable revitalisation of PSM which may entail collaboration including partnership with Russian Government, disinvestment/privatisation, Private-Public Partnership and Operations and Management outsourcing.
Commodity market (TCP/USC/PASSCO) Initial restructuring plan for the TCP, PIA, PASSCO and USC has been framed. The BoDs of these PSEs have been finalised subject to consultation between the Finance Minister and concerned Ministries.
Pakistan Machine and Tools Factory Considering the dire state of the PMTF, the CCOR decided to review and devise its business plan. The ERU finalised the business plan of the PMTF and it was approved by the CCOR. Consequently, the ECC has approved sovereign guarantee of Rs 1 billion for the PMTF. The Finance Division has facilitated sovereign guarantee subject to implementation of the reform plan developed by the ERU.
Future strategy The future strategy is to develop a framework for ensuring well-functioning Boards and to engage them in the turnaround of the PSEs. The corporate governance framework envisages i) a transparent process of Board nominations ii) capacity building of BODs iii) clarifying role of BODs iv) monitoring performance of BODs by setting key performance indicators and v) preparing of privatisation of Faisalabad Electric Supply Company (FESCO) and Islamabad Electric Supply Company (IESCO). A Task Force on Corporate Governance of PSEs has been constituted for the finalisation of corporate governance regulations for the PSEs. The Task Force has started work on this issue in consultation with stakeholders and professional bodies.