The Ministry of Finance (MoF) has initiated the process of dividing the state-owned entities into four categories on the basis of their financial performance, said a senior official.
Tanka Mani Sharma, joint secretary at the Public Enterprises Coordination Division at the ministry, said existing PEs would be categorized as those performing satisfactorily, those running in losses despite potentiality for making profit and those needing immediate liquidation due to poor performance.
“The tradition of handling all PEs under one system by putting them in a single category is inappropriate and impractical. So, we have initiated the process of putting PEs under different categories and will treat them based on their nature and financial capability,” Sharma told myrepublica.com on Monday.
Sharma also said the government will also finalize the fate of troubled PEs through documentation and valuation of their existing property which have long been either under-utilized or unutilized.
“We have initiated necessary ground work to take inventories of properties of all PEs including ill-performing entities to keep records before taking decision on their fate,” added Sharma.
In an attempt to boost efficiency of PEs, MoF has also formulated a minimum standard to those appointed to the PEs as board members as the ministry´s representative.
A committee has also been formed at Enterprises Promotion Commission to identify the performance of the PEs and the causes behind their bad performance.
“We couldn´t reduce the losses in some PEs despite representation from our ministry. So, we have set a new standard for the representatives on the basis of their expertise,” said Sharma.
The new standards also have made it mandatory for the ministry´s representatives to PEs to report to the ministry about the financial condition of the PEs, issues, problems and possible solutions to the problems of the PEs concerned every three months.
“They (representatives) have to consult with the ministry while dealing with the problems at the PEs, which have far-reaching consequences and are of much public interest,” said Sharma.
The MoF´s representatives are working as board members in 90 PEs, Development Committees and Trusts. Sharma also said the ministry is also mulling to discourage distribution of bonus to employees in those PEs which have huge accumulated losses.
During the last fiscal year, the loss making PEs distributed a total of Rs 500 million in bonuses despite the accumulated loss. The practice is against the existing bonus act.
Currently 36 PEs are operating under full or majority ownership of the government. According to the annual report of PEs published by MoF, overall net profit of the PEs had declined to Rs 4.94 billion in 2007/08 from Rs 7.74 billion in 2006/07.
prabhakar@myrepublica.com
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