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Tuesday, May 21, 2024

Privatization of PIA and PSM: significance for Pakistan

News Analysis |

The Prime Minister of Pakistan Shahid Khaqan Abbasi gave a heads up to privatization of Pakistan International Airlines (PIA) and Pakistan Steel Mills (PSM) on 16th February in the Cabinet Committee on Privatization (CCoP). This decision has been opposed vehemently by the opposition parties. The most prominent being the Pakistan People’s Party (PPP) and Pakistan Tehreek-i-Insaf (PTI).

Read more: Is PIA’s restructuring a gimmick used to kick-start privatization?

PPP’s co-chairman Bilawal Bhutto Zardari on Wednesday declared that his party will foil all attempts to privatize two state owned institutions: PIA and PSM. He said this while chairing a PPP meeting in the Bilawal house. “The PIA and PSM are owned by the people of Pakistan, who would not allow putting these national assets under the hammer in a dubious manner through a buy-one-get-one-free package,” he said, according to a statement.  

The PTI, too, has joined the PPP in criticizing the government for its privatization projects on multiple occasions. They have also expressed their resolve to resist the privatization on every level and even decided to hold protest rallies if the government is not deterred. Imran Khan during PTI’s rally on 5th March in Karachi stated that the government has only 3 months remaining so the institutes cannot be privatized in such a short amount of time. He blamed corruption for the loss of revenues in the institute.

Read more: Government sets in motion PIA privatization process

State of PIA

PIA, the national flag carrier, was one of the best airlines in the world back in the 60s and the 70s. It was equipped with the high levels of safety standards, quality and punctuality. It is the first airline to fly the Lockheed Super Constellation and second to have the Boeing 707 air jet. PIA also helped a number of leading airlines in the world like Emirates by leasing them its aircrafts and providing technical and administrative assistance to them.

Despite its illustrious legacy, PIA has been in shambles since the start of the 21st century because of the increasing competition in the airline industry and its inner inefficiencies, overstaffing and debt burden. PIA has the second worst employee to aircraft ratio, standing at almost 700 employees per aircraft while the world average is at 150-200 employees per aircraft. It currently has 18,331 employees and 21 aircrafts.

The founder of PPP, Zulfiqar Ali Bhutto introduced massive nationalism into the country and is held responsible for ruining the economy, whose effects can even be felt today.

While state owned companies are not as efficient as private enterprises, there are some examples in the world of national enterprises performing on par with private organizations. Emirates, with a fleet of 212 aircraft, has employee-plane ratio of 220 to one. For Turkish Airlines, another important regional carrier with 236 planes, it is far lower at 81 employees per plane. Air India’s ratio of 127 per plane at Lufthansa (38,000 employees: 299 aircraft), 140 at Singapore Airlines (14,000 employees with 100 aircraft) and British Airways 178 employees per aircraft.

Overemployment is not the only issue of PIA. Inefficiency and mismanagement are also causing huge losses to the national exchequer. It has accumulated a debt of Rs.319 billion in the past four years.  According to a statement by PM Abbasi, it is causing loses worth Rs. 150 million every day to the treasury. It produced revenue of Rs.89 billion in 2017, 2 billion less than the previous year while its debt servicing has reached to Rs.146 billion.

Read more: Exploiting Pakistan’s steel mills

State of PSM

The Pakistan Steel Mills (PSM) was founded in 1971 with the help of the Soviet Union. It has the production capacity of 1.1—5 million tonnes per annum of steel and iron foundries, making it one of the biggest steel mills in South Asia. The PSM is facing similar issues as the PIA. Former Prime Minister of Pakistan Shaukat Aziz tried to privatize it back in 2006 but the Supreme Court intervened and stopped its privatization.

It is currently facing an Rs.370 billion deficit: Rs.160 billion in losses and Rs.190 billon in payable debt liabilities. The government has also given it Rs.85 billion worth of injections to keep it from shutting down. They have proved unable to operate it in its full capacity as it has only been operating at 30-50% of its maximum capacity. The technologies used by it have become obsolete and competitors are produced steel at a much cheaper rate with advanced technologies.

Read more: Revival of steel mills

Common problem among the two

Both of these enterprises have been causing huge loses to national exchequer and it is unfair for the people of Pakistan to support it with their tax money. Poor governance is one of the biggest issues of Pakistan. Most governments in Pakistanis proved to be inadequate to govern necessary matters of the state, governing a business enterprise is similar to adding more weight to a broken back. Business experts believe that the lack of ownership and incentive in public sector organisations is one of the major reasons for their inefficiency.

In private enterprises, individuals cannot afford to withstand any huge amount of loses, efficiency is must for survival of any private business and bailout packages by the government aren’t easily available to private organizations. Once the stakeholders have something to gain by increasing efficiency and making the organizations profitable, they’ll adopt every method and technique to make it done.

Read more: Real vision Pakistan needs involves more than building roads

Why are the PPP and the PTI opposing privatization?

The 2018 general elections are just around the corner. Privatization would mean that a number of people would lose their job and providing jobs is one of the best strategies for gaining votes and popularity among the public. PPP claims itself to be a leftist party with socialist leanings. Their motto: Roti, Kapra aur Makan (food, clothes and home) also highlights the nucleus of their manifesto. The founder of PPP, Zulfiqar Ali Bhutto introduced massive nationalism into the country and is held responsible for ruining the economy, whose effects can even be felt today. The PPP is merely following the ideology of its founder.

The PTI, on the other hand, is flowing with the popular public sentiment with its sensational agendas. Their position appears to be merely opposition for the sake of opposition rather than for the sake of betterment. They have not provided any alternate solution to save the crumbling institutes but merely opposed it to side with thousands of people who will lose their jobs if privatization takes place.

Read more: Pakistan Steel Mills playing dirty as Renault struggles to enter Pakistan

As the world advances and evolves, old jobs are abolished but new jobs take their place, we must not fear change but accept it. The archaic ideas of protectionism and jingoism have no place in the modern world. While dissent is vital in every political discourse and democracy, it should focus on creating solutions rather than criticizing problems.