In the next financial year of 2022-23, 48 state-owned entities will incur a loss of more than Tk 24,000 crore combined — about Tk 3,400 crore higher than this fiscal, according to government projections.

At the end of current FY2021-22, this amount will stand at Tk 20,600, according to the budget document prepared on public sector enterprises.

On June 9, while tabling a Tk 6,77,864 crore national budget for the FY23 in parliament, Finance Minister AHM Mustafa Kamal is set to present a report on income, expenditure and other financial matters of these companies.

In FY2020-21, ministry sources said, these 48 public enterprises made a net profit of Tk 15,160 crore. Thirty-nine of them were lucrative and the other nine incurred a loss of Tk 2,455 crore.

At least 41 of them were making profits just two years ago. But they have suffered losses exponentially in recent times.

Six of the 48 entities are in the industrial sector; six in the power, gas and water sector; seven in the transport and communication sector; three in the trade sector; two in the agriculture and fisheries sector; six in the construction sector; and 18 in the services sector. Industrial enterprises are the companies seeing the most losses.

The government projects that the net losses will be over Tk 3,388 crore in the next budget.

According to the Finance Ministry, these public enterprises’ need for funding rises every year and they are taking out long-term loans — both of which force the government to provide capital and increase subsidies.

In the next fiscal, the amount of subsidy for these companies will rise twofold from the current and last fiscals’ amount, say the projections.

In FY23, the projected size of subsidy meant for these entities will be Tk 22,716 crore. The amount was Tk 10,535 crore and Tk 10,511 crore in FY22 and FY21, respectively.

However, the revised subsidy amount in FY22 ended up being Tk 24,877 crore while it was Tk 11,186 crore in FY21.

The problems
Economist Dr Mohammad Abdur Razzaque, the chairman of Research and Policy Integration for Development (RAPID), said, “A major problem of state-owned enterprises is their operating cost is high due to the lack of proper management.

“Also, their productivity is low due to the lack of skills. These are increasing

the burden of loss. Immediate steps need to be taken to ensure better management.”

He said the government is facing double pressure since its income is not increasing much, there are problems in the revenue sector and the expenditure to cover the losses is only going up every year.

The economist said although these state-owned enterprises are playing a role in maintaining employment, they have not undergone BMRE (balancing, modernization, rehabilitation, and expansion) as required.

“These should undergo BMRE and be rationalized to reduce the government expenditure,” he added.

For FY2022-23, the government projects that these public enterprises would earn Tk 2,54,080 crore throughout the year, and spend Tk 2,57,325 crore to procure goods and services, Tk 8,073 crore to pay salaries and allowances, and Tk 12,687 crore to cover depreciation.

This will take the overall operational loss at the fiscal’s end to Tk 24,005 crore.

In the revised budget of FY2021-22, Tk 2,30,400 crore was projected to be the income of these companies, while they will spend Tk 2,31,788 crore to buy goods and services, Tk 7,450 crore to pay salaries and allowances and Tk 11,806 crore to cover depreciation. 
As a result, the total operational loss at the end of the fiscal would stand at Tk 20,645 crore.

In FY2020-21, these companies had earned Tk 1,84,151 crore and spent Tk 1,60,460 crore to buy goods and services, Tk 6,308 crore to pay salaries and allowances, and Tk 10,490 crore to cover the depreciation. The FY23 budget projects their income will be 17.46 per cent higher than FY21. But it also forecast that the overall deficit or losses would end up being at least Tk 24,005 crore.

Value addition and productivity
Although the average cost per staff and number of employees at the companies are increasing, the value addition through them is decreasing — which means productivity is declining.

In FY2020-21, there were 1,50,331 employees in these 48 organizations and the average spending on an employee was Tk 4,19,631.

In this fiscal, the number of employees is 1,24,986 and the average cost per employee is Tk 5,95,084.

In the next financial year, it is estimated that the number of employees will be 1,25,314 and the average expenditure per employee will be Tk 6,44,297.

In FY2020-21, these companies invested about Tk 19,890 crore against their savings of Tk 23,945 crore and borrowed about Tk 4,056 crore.
Compared to the last fiscal, the investment growth rate in FY2022-23 has been estimated at 56.14 per cent and the growth rate of savings has been projected at a negative 43.26 per cent.