Just as the ongoing fiscal year, the state-owned enterprises are looking at massive losses in the upcoming FY as well, but the figure may go up four-fold in FY25.
Losses for such organisations reached nearly Tk 6,000 crore in the revised budget for FY24, which could hit Tk 28,047 crore in the upcoming fiscal year, finance ministry sources told The Business Post.
These losses will be incurred due to expenditure far outpacing the income. Compared to the FY24 revised budget, the income of 49 non-financial state-owned enterprises could go up by 8.62 per cent to Tk 4,01,689 crore in the proposed budget for FY25.
Against this income, their expenditure could increase by 14.34 per cent to Tk 4,29,737 crore in the upcoming FY.
Commenting on the matter, former finance secretary Muslim Chowdhury said, “The state-owned enterprises need significant reform to counter such massive losses. If these organisations are run as is, the future would become bleak.”
Chowdhury recommends state-owned organisations to either pull out from sectors that are saturated by goods and services from privately-owned industries, or prove competence in competing with the private sector through even more investment.
He further suggests that the directorial boards and employees of state-owned organisations should leave behind the traditional government job mentality, and restructure themselves as corporations – free from the government’s meddling.
These steps could help such organisations become more profitable.
Finance ministry documents show that in the proposed budget, capital has been set at Tk 9,11,358 crore for state-owned organisations, which is 7.39 per cent more compared to the ongoing revised budget.
So, the long-term and current liabilities of these organisations would go up.
In the next FY, investment to state-owned enterprises could be Tk 42286.15 core, compared to Tk 31983.59 crore in the ongoing FY. The government is planning to inject fresh capital in organisations currently facing losses.
Tk 13,860.81 crore will be allocated for this purpose, which stood at Tk 9,867.30 crore in the revised budget for FY24.
Speaking to The Business Post, Policy Research Institute (PRI) of Bangladesh Executive Director Ahsan H Mansur said, “The state-owned enterprises currently suffering losses should be shut down.
“These companies will never become profitable due to irregularities in the appointment process, and corruption of bureaucrats.”
He continued, “A good example of this phenomenon is Adamjee Jute Mills. It did not have much production, but there was always unrest brewing there. Now, a lot of people are working there, and the factory is generating billions of USD in earnings.
“It would not have been possible if the Adamjee Jute Mills had still been there.”
Loan-term loans to the tune of Tk 12,802 crore will be taken in the new FY to run the state-owned organisations. This figure was Tk 12,980 crore in the revised budget for ongoing FY. These organisations will have to repay loans greater than the amount of received loans.
The amount of long-term loan repayments has been set at TK 16,431.79 crore, compared to Tk 16,397.69 crore in the revised budget for ongoing FY.
Despite massive losses, the state-owned organisations are planning to pay Tk 1,084 crore dividend to the government and investors in the upcoming FY, and this figure is slightly more than Tk 1,037 crore posted in the ongoing FY.
In addition to industry, transportation, and energy sectors in Bangladesh, the state-owned enterprises are playing an important role in the country’s economic growth in different key service sectors, including utility services such as electricity, gas, and water supply.
Along with their obligation to provide public services, the state-owned enterprises’ public welfare activities and the provision of services at government-set prices are making a positive contribution to improving people’s quality of life, establishing social justice, and poverty alleviation, insiders say.
For the 49 non-financial state-owned enterprises, the Finance Division Monitoring Cell is going to publish the revised budget statement for FY24, along with the budget proposal for FY25.
These organisations are classified into seven categories – Industry, Power, Gas and Water, Transport and Communications, Commerce, Agriculture and Fisheries, Construction, and Services.
According to the actual and provisional accounts of FY23, the net profits of state-owned enterprises stood at around Tk 138.04 crore.
Even though 37 such organisations managed to turn a profit in FY24 despite economic shockwaves caused by the Covid-19 crisis, 12 companies could incur Tk 19,395.51 crores in losses in the revised budget for FY24 due to global economic headwinds, inflations and devaluation of Taka triggered by the Russia-Ukraine war.
On the other hand, the total profit of the remaining 37 institutions is estimated to be Tk 13,405.63 crore. Accordingly, the net loss of all the institutions will be Tk 5,989 crore. The budget proposal also hopes that companies will soon be able to overcome their losses by facing the challenges of global recession.
On the other hand, the total profits of the remaining 37 organisations are estimated to be Tk 13,405.63 crore.
Meanwhile, the net losses of these institutions will be Tk 5,989 crore. The budget proposal is optimistic that these companies will be able to overcome their losses in the coming days by tackling challenges posed by the global recession.
