ISLAMABAD;
The Economic Coordination Committee (ECC) of the Cabinet has approved a technical supplementary grant of Rs30.216 billion to cover severance, dues, and salaries as Pakistan winds down its state-run retail chain.
ECC held on Thursday under the chair Finance Minister Senator Muhammad Aurangzeb, approved a financial package of Rs30.216 billion to ensure the smooth closure of the Utility Stores Corporation of Pakistan (Private) Limited (USC). The approval marks a decisive step in ending decades of mounting losses at one of the country’s most prominent state-owned enterprises, while pledging protection for thousands of employees affected by the shutdown.
As per details, the funding plan is designed to cover severance payments, terminal dues, compensation for contractual workers, and outstanding salaries, alongside partial settlement of vendor liabilities. The government said the package reflects its dual priority of maintaining fiscal discipline and safeguarding employee entitlements during the winding down of operations.
The ECC directed the Ministry of Industries and Production to further rationalize the financial requirements for closure and emphasized that USC’s assets—including its nationwide properties—must be disposed of within the current fiscal year to offset the cost of the exit package. It also underscored the importance of carrying out the closure transparently, particularly the disposal of assets under the oversight of relevant ministries and regulators.
The ECC meeting was attended by Federal Minister for National Food Security Rana Tanveer Hussain, Federal Minister for Commerce Jam Kamal Khan, Federal Minister for Power Sardar Awais Ahmad Khan Leghari (virtually), Special Assistant to the Prime Minister on Industries Haroon Akhtar Khan, as well as secretaries and senior officials from concerned departments.
Industry sources noted that the supplementary grant had been under review since earlier this summer, when the Prime Minister was presented with options to either provide a Rs14 billion bailout to stabilize cash flows or approve closure by July 31, 2025. He opted for closure, leading to the constitution of a high-level committee chaired by the finance minister to oversee employee compensation, property disposal, and modalities of privatization. USC’s board formally endorsed closure on July 2, 2025, after which over 1,000 rented outlets and 1,230 franchise stores were shut in less than two weeks.
Established in 1971, USC was created to supply essential food items at subsidized rates and function as a price moderator. In 2007, the network underwent a major expansion to the Union Council level, with outlets rising from 1,023 to 5,557 and staff swelling from 3,892 to 12,749 by 2009. The scale of expansion necessitated heavy subsidies, but despite this support the corporation began recording continuous losses after 2013. By June 2025, accumulated losses had reached Rs23.8 billion.
Facing sustained losses and shrinking fiscal space, the federal cabinet placed USC in the privatization list in August 2024 and withdrew subsidies the same month. In December 2024, USC’s board approved a rightsizing plan, reducing the number of stores from 3,742 to 1,904 and employees from 11,614 to 7,710 by February 2025. However, the company’s projected annual losses remained above Rs8.3 billion.
On June 28, 2025, the Prime Minister was presented with two options: to close USC by July 31, 2025, or to continue operations with a Rs14 billion bailout to stabilize cash flow. The Prime Minister approved closure by the end of July and constituted a committee under the finance minister to oversee the process, including modalities for paying severance benefits under a Voluntary Separation Scheme (VSS). On July 2, 2025, USC’s board formally endorsed closure. Within two weeks, over 1,000 rented stores and 1,230 franchise outlets were shut down.
The closure was briefly disrupted when unions staged a sit-in at USC headquarters in Islamabad, but the protest was called off after intervention by a committee led by the Special Assistant to the Prime Minister on Political Affairs, which held meetings with union leaders at the end of July.
The finance minister–led committee subsequently met four times between mid-July and late August 2025 to finalize a lay-off package estimated at Rs16–19.5 billion. This package includes Rs13.2 billion in severance for regular employees, Rs2.2–6.3 billion for contractual and daily wage staff, Rs5.1 billion in terminal dues, and Rs684 million compensation for widows of employees. The government emphasized that payouts to contractual staff would be negotiated with unions and would not set a precedent for other state entities.
USC ceased nationwide operations on July 31, 2025, and has since been shifting stocks to warehouses for disposal. By August 31, 2025, the company intends to lay off the majority of its workforce. However, 832 employees will be retained from September to November 2025 to manage warehouses, reconcile stocks, conduct audits, and handle litigation, at a monthly cost of Rs210 million. From December 2025 to June 2026, this workforce will be reduced to 326 employees, costing Rs115 million monthly, to oversee property disposal and residual tasks.
Meanwhile, USC has not paid salaries for July and August 2025, nor half a month’s salary for April 2025, requiring Rs1.47 billion to cover wages for 7,710 employees. The corporation’s financial stress is compounded by vendor liabilities and administrative expenses.
To partially fund the lay-offs, USC was instructed to obtain fresh valuations for its 21 properties, which were estimated at Rs10.5–12.6 billion. However, complications remain: some titles have not been transferred to USC, certain properties carry leasehold restrictions or require building completion certificates, and others may incur commercialization charges. The Privatization Commission has been approached to release original property documents. The Law and Justice Division has also been tasked with exploring legal avenues for expeditious property disposal under the Privatization Commission Ordinance, 2000.
The proposed Rs30.2 billion supplementary grant breaks down as follows: Rs13.2 billion for severance, Rs5.7 billion for terminal dues and widow compensation, Rs2.2–6.3 billion for contractual staff payouts, Rs1.47 billion for pending salaries, Rs1.4 billion for retaining essential staff until June 2026, and Rs2 billion for vendor liabilities. An additional Rs9.9 billion for vendor payments would be budgeted in FY2026–27.
The Ministry of Industries and Production has submitted the proposal to the ECC after approval from the Prime Minister, who is the minister-in-charge. Finance Division’s comments have also been shared.
The closure of USC marks the end of an era for one of Pakistan’s largest state-run retail networks. Once envisioned as a nationwide price stabilizer, USC has instead become a symbol of unsustainable subsidies and mismanagement. With privatization now underway, the government faces the dual challenge of providing fair compensation to thousands of employees while ensuring that essential commodities remain accessible to low-income households.
If approved, the supplementary grant will clear a path for USC’s final wind-up and property disposal, with the process expected to continue into mid-2026. The decision will also set a precedent for how the state manages closures of loss-making enterprises in the future.
