Affordable utilities

#Affordable #utilities

LAHORE: The government is considering shutting down utility stores, which cater mostly to rural communities. Although the project has been under consideration for almost a year, no viable alternative has been devised to provide affordable commodities to the poor.

Utility Stores Corporation of Pakistan (USC) operates around 5,130 stores across the country, including 3,982 regular stores and franchise outlets. Recently, 446 stores were closed due to low revenue and significant losses especially in rural areas.

Over the years, USC has accumulated liabilities of Rs 15.616 billion, severely limiting its ability to pay vendors and sustain operations. The government is considering closing these stores as part of wider austerity measures to cut costs.

Due to bureaucratic procurement practices, USC stores have relied on government subsidies to offer discounts on essential goods. In contrast, private retailers negotiate directly with quality suppliers to secure competitive prices and offer discounts to customers. Bureaucratic inefficiencies and financial constraints have hindered USC’s ability to adopt similar approaches.

A more effective approach may involve leveraging USC’s existing network by engaging the private sector to improve efficiency and sustainability. Privatizing utility stores or outsourcing their operations to private entities can transform them into efficient and self-sustaining enterprises like successful private sector megastores.

Private sector operators have the skills to streamline operations, improve supply chains and negotiate better deals with suppliers. This can reduce waste, inefficiency and corruption, which are common in government-run operations. Private stores generally provide superior customer service, modern infrastructure and a wide selection of quality goods.

By adopting advanced inventory management and data-driven decision making, privatized stores can operate profitably or at least, break even. Private sector-run utility stores can get bulk discounts from suppliers and pass on the savings to consumers. Instead of subsidizing store operations, the government can provide direct financial assistance to low-income households through cash transfers or vouchers, enabling private operators to operate these stores sustainably.

Privatization does not necessarily result in mass layoffs. Existing employees can be retained and trained under the new arrangement. However, there may be resistance from employees and unions, requiring careful negotiation and assurances of job security.

One challenge is the potential focus of private operators on urban centers, where profits are high, potentially neglecting rural areas. This can be addressed through contractual obligations or targeted incentives. Since utility stores are intended to serve low-income groups, regulatory oversight will be necessary to ensure affordability and accessibility are maintained. A transparent procedure should also be adopted during the privatization process to prevent bias or favoritism in awarding contracts.

In neighboring India, the Public Distribution System (PDS) is primarily government-run, although some states have partnered with private entities to increase efficiency. Similarly, in Bangladesh, the Trading Corporation of Bangladesh (TCB) cooperates with private suppliers to procure goods, although problems such as stock mismanagement and corruption persist.

Privatizing utility stores or creating public-private partnerships can modernize Pakistan’s retail sector while securing affordability for low-income households. To ensure transparency, the government should call for tenders from reputed private retailers or grocery chains to run these shops. Operations can be leased to private players under performance-based contracts, while retaining ownership of the network.

At the same time, the government should implement a direct subsidy or voucher system for eligible households, similar to the practice in developed countries, where retail operations are not managed by the government. For example, programs like food stamps in the US provide financial assistance to low-income households, allowing them to shop at private stores.

Maintaining some level of monitoring and auditing is essential to ensure quality and affordability for disadvantaged communities.