LAHORE: The applicability of an austerity policy under section 42 companies has created an ambiguity among heads of firms/companies regarding the staff recruitment and purchase of vehicles, etc after they have learnt that such entities neither fall under their ambit nor under the definition of the Punjab government department.

There are many subsidiaries (companies/firms, etc) owned by various Punjab government departments, including the local government, transport and energy or the respective city district governments in big cities of the province.

These companies became operative after these were approved and registered by the Securities and Exchange Commission of Pakistan (SECP) under section 42 of the companies ordinance.

A section 42 company is believed to be an independent company legal entity and its affairs are supposed to be run by a supreme body namely the board of directors whose decisions are final and binding.

Govt’s subsidiary firms’ heads face ambiguity

The Memorandum and Articles of Association are the constitutional documents which define the objectives, scope of activities, power of directors, etc.

The documents framed for the purpose to run the business of the company like human resource, purchase and other policy manuals are duly approved by the BoD and the same are considered to be legal document having its force of applicability upon all employees or management of the company.

In addition to above, the public sector companies rules 2013 are applicable on section 42 companies which provide a legal procedure to run the affairs of companies.

Officials say since the government had appointed well-qualified professionals as managing directors or chief executive officers to run these companies under professional and innovative approaches and not like the “traditional attitude” of the government departments amid delaying tactics, they are facing problems in dealing with various issues with the government departments.

“Actually the core objective behind establishing these companies was to deal with various civic issues promptly in a professional manner. And this arrangement was done after the government departments allegedly failed to deliver due to stereo-type behavior of employees/officials who enjoy regular job status/structure without any fear.”

But whenever senior officials of departments found that these companies were delivering to some extent, they started creating hurdles in various ways, including the applicability of austerity measures, etc,” says a head of the company in Lahore.

At present, there are a number of section 42 companies working in Lahore, Faisalabad, Multan, Rawalpindi and Gujranwala. These include the Lahore Transport Company, Lahore Parking Company, Lahore Waste Management Company, Lahore Division Cattle Market Company and Quaid-i-Azam Thermal Power Company.

Similarly, some of such companies are also working at the divisional headquarters of the aforementioned cities.

An official, seeking anonymity, said since the induction of employees in section 42 companies were on a contractual basis, without job security, on need basis, market-based salaries and purely performance basis, the post-employment benefits were not given to them as in case of government employees.

According to a letter of August last year, the finance department had asked the local government department that public sector companies were not exempted from the austerity measures. “It is to inform you that all public sector companies are not exempted from austerity measures/regime and are required to follow these,” reads the letter issued by the finance department to the LG department in response to a clarification in this regard.

While nothing is mentioned in the government austerity policy about the applicability of such measures on these companies. The institutions mentioned in the austerity policies of 2013, 2014 and 2015 include the provincial departments, heads of attached departments, divisional commissioners, DCOs, Lahore High Court registrar, secretaries to governor and chief secretaries, Punjab Public Service Commission, heads of autonomous bodies/corporations, Punjab assembly secretariat, etc.

The official said since these companies were being run under the law and an effective accountability system, the government should adopt a professional approach and remove ambiguity among CEOs of various companies as well as save them from typical behavior, mainly based on delaying tactics in accomplishing minor tasks.

“In view of the prevailing company laws, rules, regulations, a clear direction is required regarding the applicability of austerity measures in respect of staff recruitment, purchase of vehicles, machinery, etc, as it is affecting the efficacy of various companies,” the official said.

DCO retired Captain Muhammad Usman said there was no ambiguity on the applicability of austerity measures and other policy issues on these companies.

“These companies are owned by the government and it can check their performance,” he said and added the approval from the austerity committee was not required for the purchase of vehicles to be used for operational purpose.

He said the government could also check the staff recruitment system of these companies.

The DCO said that agreements executed between the departments and companies also differed in respect of applicability of government policies.

Published in Dawn, July 29th, 2016