PIAHCL losses hit Rs741b

The government has approved the transaction structure for the privatisation of power distribution companies under which it will retain most of the liabilities and pensioners by setting up two more companies like the PIA holding company. (July-December) 2025 of State-Owned Enterprises (SOEs), the PIA holding company incurred Rs21.6 billion fresh losses, becoming the sixth largest loss-making entity.

With the increase, cumulative losses jumped to Rs740.6 billion – the fourth highest by any state-controlled entity in the civilian setup. To service old debts, the government has allocated at least Rs30 billion in this fiscal year's budget.

The interest cost for the current fiscal year alone is three times the Rs10 billion the government received against the sale of 75% stakes. Of the Rs135 billion total bid money, the government received Rs10 billion, while the remaining amount was being invested in PIA by the successful bidder.

The remaining 25% shares would also go to the same bidders for Rs45 billion cash. The Central Monitoring Unit (CMU) of the finance ministry tracks the financial health of Pakistan's public sector companies.

Its report showed that net fiscal flow from these entities to the state sharply fell by 91% to a mere Rs35 billion during July-December 2025, down from Rs427 billion in the corresponding period, due to higher cash support and lower contributions.

There was no reduction in overall losses, which remained at Rs343 billion during the first half of the last fiscal year, including Rs21.6 billion losses by the PIA holding company., the National Highway Authority (NHA) topped the list of loss-making entities with Rs124.6 billion losses. Its cumulative losses jumped to Rs2.17 trillion – the highest by any entity.

However, there is a fundamental flaw in the treatment of the NHA losses. The federal government compels NHA to expand the national road network and gives the money from the development budget as a loan instead of a grant.

During the period under review, the government booked Rs113 billion loans against the NHA. It then deducts interest on these loans before releasing the allocated budget. The CMU report showed that the power sector's financial situation further deteriorated and the sector continued causing huge losses.

Quetta Electric Supply Company's (QESCO) losses decreased to Rs35.3 billion – the second highest in the first half of the last fiscal year.

This took the cumulative losses of the entity to Rs844 billion but yet it did not come on the merit of privatisation set out by the Privatisation Commission, which is more interested in selling the few profitable entities.

Third highest losses of Rs34.8 billion were caused by Sukkur Electric Power Company (SEPCO) during the first half of the last fiscal year, taking its cumulative losses to Rs554 billion. Pakistan Railways caused Rs29.4 billion losses, the fourth highest.

The fifth highest losses were also caused by a power distribution company – Peshawar Electric Supply Company (PESCO), incurring Rs23.7 billion losses and taking the total tally to Rs770 billion. PESCO too is not on the priority list of the Privatisation Commission.

The seventh highest losses were also caused by another power distribution company – Hyderabad Electric Supply Company (HESCO) – with Rs18 billion losses, taking total losses to Rs582 billion. The Neelum Jhelum hydropower project, which has become a symbol of poor design and governance, also caused Rs14.5 billion losses.

Its total losses stood at Rs100 billion, showed the official report. In yet another case of bad governance and poor financial state of affairs, the closed Pakistan Steel Mills incurred Rs13 billion losses during the first half of the last fiscal year, taking its total losses to Rs275 billion, showed the report.

The Pakistan Muslim League-Nawaz (PML-N) government had closed the mill in 2016 and it is still incurring losses. The CMU stated that the power distribution companies (DISCOs) continue to suffer from weak recoveries, technical losses, governance failures and tariff under-recoveries.

These feed directly into the circular debt chain and disrupt generation companies (GENCOs), the Central Power Purchasing Agency-Guaranteed (CPPA-G), fuel suppliers and the sovereign balance sheet.

The CMU warned the cabinet committee on SOEs that the circular debt was posing high fiscal risks due to delayed recoveries from DISCOs, CPPA-G and public entities impairing the liquidity of Oil and Gas Development Company Limited (OGDCL), Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO) and Pak-Arab Refinery Company (PARCO).

Under International Financial Reporting Standards (IFRS) 9 rules, aging receivables previously treated as "guaranteed recoverable" now generate direct impairment charges – exposing systemic fiscal interconnectedness, warned the CMU.However, instead of addressing these fiscal risks, the Cabinet Committee on SOEs on Monday approved changing the law that warranted fiscal discipline and transparency.

The CMU has underlined that the IFRS risks were higher; the recognition of expected credit losses could materially reduce retained earnings and dividend-paying capacity across multiple SOEs. Debt covenants and leverage ratios may come under stress as accumulated profits are impaired, it added.

The CMU has also operationalised an integrated, policy-compliant cloud-enabled digital platform for the centralised management, reporting and analytics of SOE data.