Nil progress so far PSE reforms project continues to receive funds

In spite of zero progress in the PSE Reforms project as determined by the Finance Division, the government continues to provide substantial funds for its implementation. A Rs 2.2 billion project titled PSE Reforms was initiated in 2015 to improve governance in PSEs, with the Finance Division as the implementing agency, was a non-starter with no financial and physical progress, revealed a senior official on condition of anonymity.
He added that governance in most PSEs has not shown any significant improvement, and there was no financial or physical progress of the project. In spite of zero progress the government budgeted Rs 308 million for the PSE Reform project in the current fiscal year. The objective: to improve corporate governance structure, regulatory regimes, and management capacity of the PSEs in an effort to reduce their cost on the budget while improving service delivery to domestic, industrial, agricultural, and commercial consumers.
PSE Reform project aims at improving governance of listed PSEs and to enable them to comply with the KSE corporate governance requirements issued by the Security and Exchange Commission of Pakistan (SECP) in 2012. The SECP rules demand independent directors, a separation of the chairman and chief executive, performance evaluation of board members, and rules for internal and external audit. The majority of the PSEs that are not listed, however, do not yet comply with these rules and reforms are necessary to change the governance in PSEs.
The project''''s primary aim is to stop the magnitude of fiscal drain that PSEs currently impose as net costs to the government. Fiscal transfers to PSEs have contributed to burdening the national exchequer and to help and assist the government in the process of Public Private Partnerships by undertaking governance and structural reforms for short-, medium- and long-term.
The government maintains that it wants to put in place an effective Monitoring and Evaluation (M&E) system with regard to financial requirements, profitability, operational performance and other matters of PSE to ensure financial discipline and efficient utilisation of public resources.
The official further pointed out that the government has started borrowing heavily from commercial banks for power sector owing to concern that higher subsidy in the budget would lead to an increase in the budget deficit. A meeting of the Economic Co-ordination Committee (ECC) of the Cabinet recently approved Rs 30 billion sovereign guarantees with servicing and principle amount payable by Finance Division to the distribution companies with the objective to keep the circular debt in a manageable limit.