Pakistan Reader# 120, 14 July 2020
Two recent interventions by the Judiciary on Pakistan Railways and Paksitan Steel Mills underline the larger questions facing Pakistan's public sector enterprises. From governance issues to political interventions, the problems are beyond state funding, performance and privatization. What ails the Public Sector Enterprises (PSEs) in Pakistan?Lakshmi V Menon & Abigail Miriam Fernandez
In the News
A two-judge Supreme Court bench comprising of Chief Justice of Pakistan Justice Gulzar Ahmed and Justice Ijazul Ahsan, during the suo moto notice hearing on 9 July, urged the federal government of Pakistan to consider a complete overhauling of the Railways Secretariat to ensure safe operations of the Pakistan Railways. The SC attributed the mounting number of accidents to lack of adherence to rules and manual of PR. (Shahid Rao, “Do not play with lives, Supreme Court tells Railways,” The Nation, 10 July 2020) Speaking to the Pakistani media house Dawn on 5 July, the chief president of Pakistan Railways train drivers’ welfare association Shams Pervaiz forewarned of more accidents; calling the main track unfit for operation, urged Pakistan Railways (PR) administration to rehabilitate tracks; and warned of protests by drivers if PR forced the running of the trains in the present hazardous conditions. Pervaiz spoke of the terrible state of all express, passenger, goods trains and the mainline, principally the Multan-Sukkur and Sukkur-Karachi sections. Pervaiz claimed the incidence of 33 accidents in the span of 6 months between Karachi and Sukkur sections alone. Meanwhile, Multan division’s drivers' association president Karim Bakhsh called upon the PR chairman and CEO to order rehabilitation of the dilapidated tracks. A common complaint was that PR authorities ignored their grievances and safety concerns. (“Train drivers speak their hearts out, warn of more crashes,” Dawn, 6 July 2020)
On the PSM, earlier this year, the PTI government initiating a program to privatize several public institutions to make them profitable, among these was the Pakistan Steel Mills (PSM) which is the largest industry in Pakistan but its production is zero. The government initially decided to privatize these state-owned entities that were running in losses and help restructured through a public-private partnership. (Javed Hussain, APP, “Pakistan Steel Mills among 6 public sector entities to be sold off this year: Soomro,” Dawn, 29 January 2020)
The government in June approved retrenchment of all the 9,350 remaining employees of the PSM with a one-time severance cost of about Rs20 billion. With this decision, the government retrenched 100 per cent of the PSM’s workforce. Of the total, 250 employees were retained for 120 days for the execution of the plan and other necessary work. All other employees were issued termination notices after the endorsement of the ECC decision by the federal cabinet. (Khaleeq Kiani, “ECC axe falls on 9,350 Steel Mills employees,” Dawn, 4 June 2020) Secretary-General of Pakistan Association of Large Steel Producers (PALSP) Wajid Bukhari welcomed the ECC’s decision saying the PSM had turned into deadwood and stood at zero production since 2015, adding that the PSM had become a liability and the government was left with little option but to cut the limb and save the body. (Zubair Qureshi, “End of an era for Pakistan Steel Mills,” Gulf News, 4 June 2020)
Opposition parties in the country raised their voice against the government’s decision to privatize the PSM. Vice President of the Jamaat-i-Islami (JI) Pakistan Liaquat Baloch demanded the withdrawal of this decision threatening that the JI along with the PSM employees’ unions would stage a protest. Further, PPP chairman Bilawal Bhutto also raised criticism over this decision. (“JI threatens protest in Islamabad over PSM privatisation,” The Nation, 22 June 2020)
Issues in the background
The tricky trails of Pakistan Railways
Statistically, in Pakistan, one train accident occurs every three days. The frequency has swelled in recent years. Reports say that in 2019 over 100 minor and major train accidents occurred between the mainline’s Multan and Karachi sections. (“A tough year for Pakistan Railways: 2019 marred by over 100 accidents,” Dawn, 1 January 2020) These include the derailment of a goods train near Padedan Station on 18 May, eight wagons of a freight train near Rahim Yar Khan on 1 April, Zakria Express on 23 July, and Thal Express near Kundian station on 21 May; splitting into two sections of the moving Pakistan Express on 11 July; 20 June accident of Jinnah Express; a collision between a goods train and Akbar Express on 12 July; and the 30 October Tezgam fire tragedy near Rahim Yar Khan. (“Pakistan train fire: Are accidents at a record high?,” BBC News, 1 November 2019) A survey identified 550 level crossings that were prone to accidents. (“The Next Station is: Death,” Newsline, August 2019)
The 2018 National Transport Policy was presented as a means to better Pakistan’s transportation network. Subsequently, in 2019 PR’s deficit decreased by Rs0.059bn; and recorded its highest ever revenue of Rs 54.6bn for FY2018-19. (“Pakistan Railways achieves record income in 2018-19,” International Railway Journal, 20 August 2019)
As per 2020-21 Budgetary documents, Rs124 billion has been allocated for the Pakistan Railways; Rs24 billion for executing 41 ongoing and new Railway projects in the Public Sector Development Programme, and Rs100 billion for operational, non-operational, pension and salary expenses. Upgradation of ML-I project will be implemented under CPEC. Annual Development Plan says that railways’ systemic improvement and economic feasibility will be ensured by the development of an integrated and multimodal transport system. ADP calls for optimal utilization of inherent capacity by a shift of freight towards railways. The plan stressed on optimal utilisation through rehabilitation and maintenance of assets, enforcement of efficient managerial practices and operational techniques. (“Govt sets aside Rs124b for Pakistan Railways,” The Express Tribune, 13 June 2020)
Reasons behind Failure
The nexus of administrative issues, bureaucratic glitches, politicization, involvement of the Pakistani military, and maneuvering by the Deep state has made the Pakistan Railways crumble from within. Corruption, nepotism and inefficiency are rampant. Fractured tracks, poor railway infrastructure, over-speeding by drivers, overloading of freight trains, and negligence and indifference of higher railway bureaucracy add to the issue. (“Railway probes,” Dawn, 12 May 2020)
On 27 January, the CJP-led SC bench summoned minister and top officers of Pakistan Railways to give explanation for the issue of losses and falling standards. The bench said that no department in Pakistan was more corrupt than Pakistan Railways. Widespread corruption across maintenance, recruitment and procurement systems and the lack of reprimanding are huge problems. Blames are pinned down onto junior staff and senior staff are exempted with a maximum of a transfer. Even a rare suspension is revoked within weeks. Departmental probes are generally left incomplete and findings are not made public. The bureaucracy, politicians and the public remain least interested in the reasons.
Downplaying accidents is a common trend. PR authorities avoid counting accidents occurring at unmanned or manned level crossings; an attempt to shrink the official count. (“Real Railway Problems,” The Nation) Authorities shift blame onto dilapidated rail tracks, outdated rolling stock and human error such as color-blindness and sleeping off of drivers for derailments and accidents.
In 2013, the then Federal Minister for Railways Khawaja Saad Rafique blamed civilian and military governments for damaging Pakistan Railways. (“Civilian, military govts damaged Pakistan Railways: Rafique,” Dawn, 18 November 2013) PR remains the worst sufferer of the military government created National Logistics Cell (NLC). (“Railways and the NLC,” The Express Tribune, 16 October 2014) The copper stealing scam was another illustration of the direct involvement of the military. (“Army Major arrested in Pakistan Railways copper heist case,” The Express Tribune, 12 September 2011)
As the elite remains largely unaffected, railway problems are mere issues for political point-scoring. However, institutional, infrastructural, legal and environmental revamping and reformation of Pakistan Railway are crucial in reducing road traffic, the country’s carbon footprint and pollution. (“Reforming Pakistan Railways,” Global Village Space, 5 December 2019)
The plight of Pakistan Steel Mills: Unending story of losses and liabilities
The problem in terms of numbers
With no plan for its 14,753 employees, PSM stopped its commercial operations in June 2015 when its gas supply was drastically curtailed for non-payment of bills that were significantly lower than the default of a private sector entity at the same time. The workforce was cut down to 8,884 in 2019. In a report produced to the Supreme Court, the government spends Rs355 million every month in net salaries to the employees, excluding leave encashment, provident fund or gratuity.
The total losses and liabilities of the mills have gone beyond Rs 500 billion, further about 2.5 billion dollars in foreign exchange has been accounted as loss per annum to the country because of import of steel which should have been produced at the PSM. Further, about Rs270 million per month in salaries to was paid out to the PSM employees from the federal budget, without any attempts to revive the enterprise. (Zulqarnain Iqbal, “Pakistan Steel Mills closed operations with no plan for workforce’, Samaa, 9 June 2020)
The report compiled by the Ministry of Industries and Production also showed that the federal government has disbursed Rs58 billion to the PSM through five bailout packages since 2008-09 to ensure the survival of the country’s largest industrial unit thus far. (Hasnaat Malik, “Pakistan has spent Rs58b on PSM since 2008,” The Express Tribune, 7 June 2020)
Further, the mill was designed for an annual production of 2.2m tonnes to be profitable. However, its capacity never exceeded 1.1m tonnes due to the lack of investment and interest shown by those in charge of it. The mill witnessed profit only between the1985, the year it began commercial operations and 2008 the last year it earned profits. (“PSM workers’ sacking,” Dawn, 7 June 2020)
Reasons for the failure
PSM is one of Pakistan’s most politicised public-sector businesses and which has been suffering large losses and accumulating massive liabilities for over a decade. According to a summary submitted to ECC the failure of the country’s mother industry is an unending story of unchecked corruption, inefficiency, and over-employment. PSM owes its decline to frequent losses, corruption, debts and poor management. It would be unfair to solely blame the employees for PSM’s collapse, the fault lies in the poor management and failure to appoint the efficient people with the relevant experience and knowledge has done more damage to the enterprise than overstaffing or trade unionism.
The PSM has seen eleven years of gross negligence and suffered losses not because the steel industry is in decline, but because of the mismanagement, half-hearted attempts to revive it, inefficiencies and above all criminal negligence that has left it in this deteriorated state. (Mushtaq Rajpar, “The saga of a mill,” The News International, 15 June 2020)
Since 2006, no government has taken any measure to carry out in-depth investigations or determined how and why losses occurred, who is responsible for inefficiency and who should be made accountable for the problem. Thus, leaving the PSM which was once known as the jewel of Pakistan’s industrial world in a dire state. (Samson Simon Sharaf, “A stillborn Pakistan Steel Mills,” The Nation, 13 June 2020)