Pakistan Steel Mill, PIA and Pakistan Railways in ICU.

Posted on June 12, 2020

Amid Corona Virus epidemic, downfall of economy and coming budget for 2020/21, the questions has again been put forward that how to deal with loss bearing institutions under public sector. The topmost among them are Pakistan Steel Mills, PIA and Pakistan Railways. Others include Heavy Electrical Complex Taxila, Heavy Mechanical Complex Taxila, Pakistan Engineering Company (PECO) and Pakistan Machine Tools Factory.

For Pakistan Steel Mill the Economic Coordination Council’s (ECC) has decided to fire over 9,350 employees at Pakistan Steel Mills (PSM) remained out of 30,000 at the peak time of PSM.

This would start a worst period for these PSM’s workers and their families and would add up in to 2-3 million workers going to be laid off in hot temperature of Corona Virus. For all the sacked employees of PSM, government has announced Rs20 billion as compensation package. Ironically, the decision came exactly five years after the PSM closed its productions and operations in June 2015.

PSM owes its deterioration to frequent losses, corruption, debts and poor management. It has not paid salaries to its staff since May 2016, not paid gratuity to its former employees who have retired since May 2013 and has failed to give provident fund to retiring staff since 2015 (the total number of employees in these two categories is 3,000). The Pakistan Steel Mills’ total losses and liabilities are estimated at Rs 400 billion. According to the ECC the PSM is facing Rs550 billion deficit and billions are being spent on debt servicing.

It will be unfortunate as under the proposed compensation package of Rs 600,000 to Rs 700,000, it is nothing but peanuts. The government instead of terminating the services should have used their talent and taken measures for a revival of the PSM and turn it into a lively and productive unit but neither the previous governments nor present Government could do it.

There are more than 140 steel melting induction furnaces installed in different areas of Pakistan who are producing good quality steel to meet Pakistan’s steel requirements. Representing these Mills Secretary General of Pakistan Association of Large Steel Producers (PALSP) Wajid Bukhari welcomed the ECC’s decision saying the PSM had turned into dead wood and stood at zero production since 2015.

He is right to say “that when operational, PSM production stood at 1.1 million tons with a workforce of 10,000 or more workers whereas in our individual capacity we are producing 0.6 million tons (60pc of PSM’s production) with only 2,000 workers.” He further says that PSM had become a liability and the government was left with little option but to cut the limb and save the body.

Apart from PSM another question right now is that whether PIA can be restructured through privatization or through putting some good management after another crash of its plane on 22nd May 2020.

Once“Great people to fly with” was the icon of PIA but now it has nosedived. Once a source of pride, Pakistan International Airlines is now struggling to stay alive with huge losses. During the last 12 years ten heads of the PIA had been changed. PIA is Pakistan’s largest airline and operates a fleet of more than 30 aircraft. The airline used to operate nearly 100 flights daily. But now after corona Virus it’s all flights have almost halted.

PIA began to sustain operating losses and liquidity problems onward 1990s due to issues with various vendors, over-staffing, and political interference in airline management. PIA’s deficit has dropped from Rs32bn in 2018 to Rs11bn in 2019 and to some extent in 2020. PIA’s financial crisis started with the advent of the open skies policy adopted in the 1990s and subsequent grant of liberal rights, particularly to the United Arab Emirates and other Gulf states. Approximately Rs107bn was lost by the national exchequer during 2017 as a consequence of allowing open skies/liberal traffic rights arrangement to the airlines of Gulf countries, including the UAE, Turkey and Sri Lanka. Rs24 billion is being spent yearly alone on payment of salaries to the PIA’s 14,500 employees Total accumulated losses of PIA were estimated at around Rs 438 billion in December 2018 and it employs 12000 permanent employees and 3400 daily wagers which makes 400 employees per aircraft ratio. Flag carrier is facing a loss of Rs6 billion every month due to travel restrictions imposed by a number of countries in the wake of corona virus pandemic.

Sources maintain that employee-related costs form the biggest share in PIA’s expenses. Global website Air fleets net reports only 30 active aircraft for PIA, translating into an employee to aircraft ratio of 481, which is almost three times higher than Air India (165) and almost four times more than Turkish Airlines (116). This dubious approach on the aviation policy seems to be aimed at destroying the aviation industry of Pakistan.

Another liability i.e. Pakistan Railways had suffered over Rs410million in terms of losses in various train accidents in between August 2018 and December 2019.

About the casualties and injured persons, five major train accidents of passenger and good trains occurred from August 2018 to December 2019 with 100 train-related incidents, including some fatal accidents, in which 110 persons died and 123 injured. The Pakistan Railways (PR) and its huge number of passengers found the year 2019 worst as a number of accidents, including the horrible Tezgam tragedy in October 2019. Besides this, 111 incidents of engine failure on the way were reported within first five months of the year alone. At least, 73 passengers lost their lives while over 100 were injured in Tezgam fire incident alone

These indents exposed wrong decision-making and incompetence allegedly on the part of the management while dealing with the department’s operations. Pakistan Railways Vision 2026, which seeks to increase the company’s share of the transportation sector from four to 20 percent with the ₨886.68 billion (US$6.3 billion) China–Pakistan Economic Corridor rail up gradation that have not materialized. The plan included new locomotives, development and improvement of current rail infrastructure, an increase in average train speed, improved on-time performance and expansion of passenger service. In the 2018/19 financial year, Pakistan Railways served 70 million passengers.

Unfortunately over the years lack of attention, poor policies, increasing expenditures, misappropriation of funds, pilferage, nepotism, floods and inadequate technology and mismanagement have left Pakistan Railway with huge budget deficits running in billion of rupees and other crises.

The revival of all these industries lies only in handing over their management to the minority share holders in these industries. They can only plan how to revive them.

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