Parastatals making huge losses is no surprise. What is surprising is that they have been allowed to do so for so long
When Finance Minister Ram Sharan Mahat presented the Annual Performance Review of the Public Enterprises (PEs)-2015 in the Parliament on 12 July and pointed out the staggering loss of state-owned ventures, many in the audience were asking: so what else is new?
The fact that parastatals are making huge losses is no surprise. What is surprising is that they have been allowed to do so for so long. Every year, the people hear it just before the Finance Minister’s budget speech and forget about it for another year. No government has ever tried to reform, privatise or dissolve the loss-making PEs, which have been bleeding the state coffer dry over the last two decades.
In the fiscal year 2014-15, the PEs’ accumulative loss rose to Rs 26.92 billion from the previous year’s Rs 20.61 billion. Only 18 of the total 37 PEs made net profits while 15 incurred losses. The status of 4 PEs was not included in the review report.
Nepal Telecom, Civil Aviation Authority Nepal (CAAN) and some banks continue to make profits. But their achievement has always been eclipsed by huge losses incurred by other PEs. Nepal Oil Corporation (NOC) and Nepal Electricity Authority (NEA) top the list of losers. These two have accumulative losses at Rs 32.84 billion and Rs 17.94 billion respectively. Five other PEs have losses amounting to more than Rs 1 billion each.
When PEs fail to make profits, the government has to provide loans – much of which is never paid back – to help them offset their losses. It could be justifiable to provide loans and subsidies to some loss-making but social service-oriented PEs like the National Food Corporation (NFC). But the government has been spending money from its state coffer to help some commercial PEs like the NOC, too.
The answer to what ails the PEs can be found easily. Experts blame the political leadership for failure of commercially-viable PEs like the NOC. “If political leaders appoint competent people instead of their relatives, party members and henchmen, most PEs will start making profits,” says Bimal Wagle, Chief of Public Enterprises Board (PEB). “But they are not ready to reform PEs despite knowing what is actually needed.”
Wagle says some PEs like the National Trading Limited cannot be reformed from within and need to be either privatised or dissolved. “The situation in which National Trading was set up changed a long time ago, private companies are now selling what it sells,” he says.
“We cannot rescue these PEs without handing them over to the private sector. If privatisation is not possible, they need to be dissolved. But political leaders do not want to go for either option as long as they can milk them.”
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