Supreme Court Wants Recovery Of State-Owned Entities Collective Net LossesSupreme Court Wants Recovery Of State-Owned Entities Collective Net Losses

Supreme Court Wants Recovery Of State-Owned Entities Collective Net Losses

Supreme Court Wants Recovery Of State-Owned Entities Collective Net Losses: Supreme Court of Pakistan has expressed serious concern over the increasing losses faced by the state-owned organisation like PIA and other state owned entities. Net profits of these companies have turned into net losses in totality, posing threats to the national exchequer in months and years ahead.

What SOEs Do?

The SOEs in Pakistan are engaged in the provision of essential infrastructure and related services such as electricity distribution and generation companies, gas and pipeline infrastructure, transport, promotional and advocacy organizations and commercial and non-commercial financial institutions.

Supreme Court Wants Recovery Of State-Owned Entities Collective Net Losses
Supreme Court Wants Recovery Of State-Owned Entities Collective Net Losses

There are 183 SOEs categorized under three broader categories, including

  • public sector companies (PSCs),
  • non-banking finance companies and development finance institutions (NBFCs & DFIs)
  • key Federal Authorities.

For the first time in the country’s history, the net profit had turned into net losses, which should have been major concerns for all economic managers of the country.

Reason Behind The Net Losses Faced By SOEs

  • The power sector was not allowed to pass on the increase in tariff, so it faced loses. These accumulated losses had turned the net profits of SOEs in totality into net losses.
  • Increased exploration and prospecting expenditure on the enhanced geophysical survey
  • higher operating expenses mainly owing to increase in depreciation on property, plant and equipment, impairment on development and production assets and joint venture expenses
  • Increase in repairs and maintenance pertaining to equipment, annual turnaround of major plants and software maintenance contributed to the reduced profitability.

The Ministry of Finance has prepared a report on performance review of State Owned Entities (SOEs) on the basis of financial accounts for fiscal year 2015-16 which would be released after finalization and approval of the budget 2018-2019. The last year review report for 2014-15, the overall profitability of SOEs remained under pressure, especially in the energy sector, owing to fall in international oil prices. The Ministry of Finance has established the economic reform unit (ERU) to repair the SOEs in consultations with the line ministries.

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