- The Steel Mills should be only the beginning
Pakistan Steel Mills shut down commercial operations in 2015. Its 9350 employees are being paid Rs 350 million per month in salaries since then. Finally, almost two years after coming into power, the present government has decided to put an end to this financial drain by announcing a golden handshake of Rs 20 Billion. So far this step has been approved by the ECC, as well as the full Cabinet. It remains to be seen if the government’s will is strong enough to see this through. The next step should be to make another attempt at privatising the steel mills. The book value of the Pakistan Steel Mills is around $480 million. Regardless of the current market value of its land, it is unlikely that a mill that has been shut for five years can fetch that price. Even if it can be privatised for half this amount, it will be worth it. Not only will the annual drain of Rs 25 Billion cease, the government will be better off by Rs 37 Billion.
If the steel mills can be privatised, why not PIA? Our national carrier has around 14,800 employees which are 10,000 too many. These employees cost the government Rs 30 Billion every year, while the airline loses over Rs 50 Billion per annum. If a golden handshake of Rs 30 Billion can be negotiated with the employees, it would pave the way for the privatisation of this loss-making enterprise. With net assets of around Rs 50 Billion the cost of the golden handshake could be financed by the sale of the airline. It is said that the PIA employee unions are very strong. Does our present government have the will to take them on? The previous government tried to privatise PIA and the unions went on strike. At that time our noble prime minister put politics above country and sided with the striking unions.
There are many state-owned enterprises which are costing the taxpayers billions every year. The Utility Stores Corporation is another example. With over 6000 outlets it is by far the largest supermarket chain in the country. Although the USC has only 15,000 employees, because of mismanagement it lost Rs 5 Billion last year.
The land that is being used to grow sugarcane could easily be used to grow cotton and wheat, both of which could be exported (without having to give subsidies). In our country 2.4 million acres of land is under sugar cultivation. Over 5.5 million tons of wheat could be grown on the same acreage, which at the current international price of $200 per ton, could fetch us over $1 billion a year. As a matter of fact, cotton could be used to increase our value-added textile products which could increase our exports significantly above $1 billion a year
The biggest drain on the poor taxpayers of our country is Wapda and its distribution companies. Our line losses of 30 percent cost the exchequer Rs 215 Billion every year. Line losses in most developed countries are around 5 percent. In our South Asia region Sri Lanka is the lowest with 10 percent and Pakistan is the highest. If the distribution companies could be privatised these losses could be brought down to 15 percent, saving the country Rs 100 Billion per annum. However, electricity is too big a subject to be analysed in this short article. Suffice it to say it is probably the biggest financial disaster in the history of our country. There is no reason why this problem cannot be fixed. If the government has the will, it would find a way.
Recently the sugar investigation report was published with a lot of fanfare. Attention was drawn to the billions of rupees in subsidy given to wealthy sugar barons. By focusing on subsidies, a much bigger question was brushed under the carpet. Why do we grow sugarcane and why do we produce sugar? The people of our country are being made to pay over Rs 70 per kg for sugar when sugar could easily be imported for Rs 45 per kg. The argument that we are short of foreign exchange and imports have to be paid for in foreign currency is baseless. The land that is being used to grow sugarcane could easily be used to grow cotton and wheat, both of which could be exported (without having to give subsidies). In our country 2.4 million acres of land is under sugar cultivation. Over 5.5 million tons of wheat could be grown on the same acreage, which at the current international price of $200 per ton, could fetch us over $1 billion a year. As a matter of fact, cotton could be used to increase our value-added textile products which could increase our exports significantly above $1 billion a year.
If the government has the will, it can find a way to tackle the above issues for the benefit of 200 million Pakistanis.
