Pakistan Engineering Company

Type	Public
Traded as	PSX: PECO
Industry	Engineering
Founded	1932 (1932)[1]
Founder	CM Latif[2]
Headquarters	Lahore, Pakistan

Pakistan Engineering Company (PECO), formerly known as Batala Engineering Company (BECO) is a Pakistani engineering company based in Lahore. It was established by Chaudhry Mohammad Latif Arain in Batala, East Punjab, British India in 1932 and moved to Lahore, Pakistan after partition. The company was named as Batala Engineering Company Ltd after the name of Latif’s hometown.

History

Post Partition

After partition, the second phase of BECO development began. It was a beginning from scratch all over again. In December 1947, BECO was allotted Mukand Iron & Steel Works Ltd., an abandoned factory that required reconditioning on a large scale. About 120 machines of the Wagner Plant, obtained from Germany, were installed in the premises of the allotted factory. Huge constructions had to be undertaken to accommodate these machines. It took 3 years for the old Mukand Factory to grow into modern BECO Works. Beco now consisted of eight departments; Steel works, steel foundry, steel rolling mills, iron and nonferrous foundry, machine tool shop, diesel engine shop, structural shop, and general engineering shop.^[3]

Nationalization

Zulfikar Ali Bhutto took over on December 21, 1971 and on January 1, 1972 his government promulgated the Nationalization and Economic Reforms Order nationalizing 31 key industrial units, completely wiping out BECO.^[4] The company’s name was changed to PECO (Pakistan Engineering Company). Like other nationalized companies, PECO did not cut it and by 1998, it had run up an acknowledged accumulated loss of Rs. 761.58 billion. In October 1977, Gen Zia-ul-Haq offered to return control of the company to Mr. Latif and his management but Mr. Latif refused to accept the offer unless the same were extended to owners of all nationalized industries. After the amendments to the Economic Reforms Order, Latif had a short meeting with the President and raised the issue of BECO’s return to the original management. The President acknowledged and promised to expedite the matter for an early return but before he could fulfill his promise, he was assassinated. Subsequently, the Transfer of Management Order 12 of 1978 was amended by the incoming government and the new procedure adopted was to put on sale these units through open bidding and the highest bidder.

Privatization

In 1995, the privatization commission advised the company to close down Badami Bagh Works. When this didn’t work, the Government abandoned the factory and sold out tons and tons of steel in the building infrastructure. In 1999, the Privatization Commission got active again and placed an advertisement of PECO on sale one more time. Latif went to the courts and filed a case in the Lahore High Court against the Privatization method which was declined. In June, 2003 it came to be known that the Government was negotiating privately to sell PECO's assets and again going back on its mandate to privatize the Company as a whole identity.

The government restructured the company with having all the machines, equipment, steel sheds moved from Badami Bagh to Kot Lakhpat. Decision to close down unprofitable segments of the company was taken which included shutting low technology products such as machine tools or power looms. The corporate structure of the company was altered with private shareholding increased to 67% and government shareholding reduced.^[5] As a result of this decision, recovery of loans worth Rs3.314 billion which PECO owed to the government became doubtful.^[6]

In an investigative report compiled by Javed Hasnain Rashid & Company, a chartered accounting firm retained by PECO management in 2018, it is alleged that the ultimate buyers of the shares from NIT were veteran investment banker Arif Habib, through Rotocast Engineering (Pvt) Ltd, and Masood Ahmad Khan Soodi, through Maha Securities. The central allegation in the report was that NIT acted on behalf of Arif Habib and his associates and improperly sold its shares, an action that, if true, would constitute not just insider trading, but several other counts of securities fraud.^[7] The government only retained a one-third share in the company until private shareholders, led by Arif Habib, flipped the board of directors. The government now only had three seats while private shareholders controlled six.

The Private Control Era

In the six years ending June 30, 2004, even as PECO accumulated net losses, its revenue grew in extraordinary numbers, so much so that it nearly quadrupled. Despite this unauthorized sale of NIT shares being reported almost immediately, no real action was taken during the Musharraf Administration. However, when President Asif Ali Zardari was sworn in, there was a renewed interest in the legislature to examine the record of the military government. The Public Accounts Committee (PAC) of the National Assembly, led by Sardar Ayaz Sadiq, formed a committee to find out what happened and who was responsible. The committee ended up blaming officials, claiming that insider trading had taken place. The report’s specific language was highly debatable. It claimed that there was insider trading and that private shareholders were able to gain control of PECO as a result of that insider trading. It urged the government to buy back shares rather than demanding they simply be confiscated.^[7] The government then tried to enter into negotiations with Arif Habib in the hopes of getting him to sell his shares but he decided against it.

PECO Now

The management of the Pakistan Engineering Company (PECO) is said to have virtually halted the working of the company since 2019 as the Board of Directors has been disbanded due to which no board meeting has been held for the past few years.^[8] Due to a dispute between the MD and the Board of Directors, it was decided that the reconstitution of the board and removal of the MD was the first step in proceeding further. The Privatization Division briefed the cabinet body about the case and submitted the following proposals for consideration and approval of the CCOP as recommended by the Privatization Commission board in its meeting held on June 3, 2021 and proposed that PECO be removed from the active privatization list.^[9] The company is at present non-functional.

References