State-owned enterprises incur Rs408bn loss in six months, report reveals

Pakistan’s state-owned enterprises (SOEs) reported losses of Rs408 billion during the first half of fiscal year 2024, bringing cumulative losses since 2014 to Rs5.9 trillion as of December 2024, according to a bi-annual report for fiscal year 2024, issued by the Central Monitoring Unit (CMU) of the Finance Division. 

The report also noted that SOEs contributed Rs200 billion in taxes, a 14% decrease compared to the preceding six months. Gross revenues for federal SOEs totaled Rs7.011 trillion, marking a 15% increase from the prior year’s corresponding period. However, net aggregate losses stood at Rs147 billion after excluding Pakistan Sovereign Wealth Fund (PSWF) entities.

Among loss-making SOEs, the National Highways Authority (NHA) reported the largest loss at Rs151.3 billion, followed by QESCO with Rs56.2 billion and PIA with Rs51.7 billion. Other notable losses were incurred by PESCO (Rs39 billion), Pakistan Railways (Rs23.6 billion), and SEPCO (Rs20.9 billion).

Additional entities contributing to the losses include Pakistan Steel Mills (Rs14.4 billion), IESCO (Rs12.1 billion), and GENCO-II (Rs8.3 billion). Meanwhile, profit-making entities such as OGDCL (Rs123.2 billion), PPL (Rs68.7 billion), and National Power Parks Management (Rs36.2 billion) demonstrated financial resilience.

Despite accounting profits, the report emphasized liquidity challenges and high Weighted Average Cost of Capital (WACC), which ranged between 17% and 22%. The sector’s Economic Value Added (EVA) was recorded at negative Rs2,400 billion, reflecting inefficiencies and financial instability.

The government extended Rs436 billion in fiscal support during the six-month period, including Rs120 billion in grants, Rs231 billion in subsidies, and Rs85 billion in loans. Non-tax revenues dropped 27% to Rs349 billion, while dividends fell sharply by 71% to Rs9 billion.

Key structural challenges included circular debt, which stands at Rs2,800 billion net, primarily stemming from inefficiencies in the power sector. This debt burden has impacted strong entities such as OGDCL, PSO, and PPL, while liquidity issues have constrained operations across the SOE portfolio.

SOEs face additional financial strain due to transmission and distribution losses in the power sector, averaging 10–15% of purchased electricity units. This resulted in losses amounting to Rs140 billion in six months, significantly affecting financial stability and operational liquidity.