THIS is with reference to the report ‘State-owned enterprises being reformed to pay dividends, says Tarin’ (Aug 24), according which, addressing a meeting at the Pakistan Stock Exchange (PSX), the finance minister said the government was working on reforming the state-owned enterprises (SOEs), and those having sufficient cash would be encouraged to pay dividends which will help increase PSX value.

Reforming SOEs has been the manifesto of almost all the leading political parties of Pakistan, but no significant progress has ever been made in this regard despite its economic importance.

Many big SOEs, like Pakistan International Airlines, Pakistan Railways and power distribution companies, are collectively making losses of over hundreds of billions of rupees yearly, which is a burden on the country’s already struggling economy. The few SOEs that are making profits are not paying enough dividends to its shareholders due to cash flow problem or other reasons.

The Pakistan State Oil (PSO), for instance, is a national giant. The annual turnover of PSO is the highest among all public- or private-sector companies in the country. PSO announced on Aug 25 a record-breaking gross revenue of Rs1.4 trillion and the highest ever post-tax profit of Rs29.1 billion for the 2020-21 fiscal.

The net profit translated into a very healthy earning per share of Rs62.07 versus a loss of Rs13.77 in the preceding fiscal. But the company announced a dividend of merely Rs15 per share, which is highly disappointing.

After adjusting the carried-forward loss of Rs13.77 per share of 2019-20 fiscal, PSO still had a net profit of Rs48.30 per share. The share price of PSO fell sharply since the disappointing announcement of the said dividend as the shareholders appeared to be wondering about the reason behind this inexplicably low dividend payout. Was it because the PSO profit, which belongs to shareholders, was being used to finance circular debt? The PSO management surely owes an explanation to the shareholders.

Another shock for the shareholders is that the company will take at least two months to pay off the dividends. In today’s technologically advanced world, why does the PSO need that much time to pay the dividends? This is very discouraging for the shareholders.

In view of the above, I urge all concerned to look into matter of reforming SOEs on a priority basis. I believe that when the SOEs will improve their performance, the rest of the pieces of the country’s economic puzzle will start falling into place.

Ejaz Ahmad Magoon
Lahore

Published in Dawn, September 16th, 2021