The Privatisation Commission (PC) has kick-started the privatisation process of Pakistan Engineering Company Limited (PSX: PECO).
The management of PECO has been directed not to make significant administrative, financial, or policy decisions without obtaining prior approval from the Privatisation Commission, as disclosed in the company’s filing on the Pakistan Stock Exchange (PSX) on Wednesday.
This move comes as the PC invokes its authority under section 5(f)(g)(h) in conjunction with section 35 of the Privatisation Commission Ordinance 2000.
PECO specializes in the manufacturing and sale of various engineering products. Among its notable offerings are electricity transmission and communication towers, electric motors, pumps, and steel-rolled products, among others.
For over three decades, successive Pakistani governments have shown a strong inclination towards privatisation of loss-making state-owned entities (SOEs).
In September, the interim Finance minister Shamshad Akhtar unveiled a government policy focused on restructuring state-owned enterprises (SOEs) that are experiencing financial losses. The proposed policy seeks to ensure that CEOs and board members of these struggling SOEs are appointed independently, free from ad-hoc interventions by ministries.
The policy further mandates that any exemptions from PPRA Rules can only be granted following approval from the federal cabinet, and it requires all organizations to maintain electronic financial data.
Currently, there are 18 financial SOEs, including 4 in Industrial and State Development and Management, 12 in infrastructure, transport, and ITC, 14 in manufacturing, mining, and engineering, 8 in oil and gas, 20 in the Power Sector, and 4 in the Trading and Marketing Sector.
In fiscal year 2019, all SOEs collectively contributed Rs 4,000 billion in tax revenue, with a recorded book value of their assets reaching Rs 19,000 billion. These SOEs also employ around 0.450 million individuals.
Financial losses incurred by these SOEs had increased to over Rs500 billion in 2020, compared to Rs143 billion in 2019.
Top ten loss-making SOEs in 2019, including Quetta Electric Supply Company (Rs 108.5 billion), National Highway Authority (Rs 94.3 billion), Pakistan Railway (Rs 0.2 billion), Sukkur Electric Power Company (Rs 40.8 billion), Pakistan International Airlines (Rs 36.07 billion), Sui Southern Gas Company Limited (Rs 21.4 billion), Pakistan Steel Mills (Rs 20.6 billion), Hyderabad Electric Supply Company (Rs 17.7 billion), Pakistan State Oil Company (Rs 14.8 billion), and Peshawar Electric Supply Company (Rs 14.6 billion).
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As far as I know, the policy also requires all businesses to preserve electronic financial data and stipulates that any exceptions from the PPRA Rules must be approved by the federal cabinet.