On this particular day in April 2014 I walk hurriedly into a building in Blue Area, which is the head office of Utility Stores Corporation (USC), an organization that operates chain stores throughout Pakistan. The appointment with the Managing Director (MD), Khaqan Murtaza, has been rescheduled due to consumption of the previously appointed slot on his timetable. As I walk into the office, I become acquainted with the MD who is seated across the table with huge piles of paper files stacked on it. The office is set in a total bureaucratic style, very spacious with vast windows overlooking Jinnah Avenue in Islamabad.
Buffered between hoarding and profiteering, the USC network is spread across every nook and corner of the country. It provides basic commodities to general public at rates lower than the open market. USC is governed by a Board of Directors and headed by a MD. The current MD took charge of USC on 15 August 2013. Upon taking the charge, Mr. Murtaza has taken some major steps to maximize relief to consumers which includes improving the quality of products and introducing check and balances to stop irregularities and corruption.
Every year, at the advent of Ramadan, the role and importance of USC catches the public eye as more and more people visit these outlets to buy groceries at subsidized rates. In this exclusive interview with Economic Affairs, the MD of USC talks about reforms and measures that have been taken to improve the efficiency of these welfare stores.
E.A. How important is the role of USC in the creation of direct/indirect employment and poverty reduction?
The scope of Utility Stores is wider than that of a public sector commercial organization. Besides its basic role that is the provision of essential kitchen items at affordable prices, USC has a very important role in the national fabric. It is a welfare organization that generates employment opportunities, gives a mechanism of price stability, ensures food security in far flung areas and acts as an immediate relief provider during natural calamities.
The USC has a workforce of 14,600 people across the country; whereas hundreds of thousands of people are associated with it indirectly. I am referring to the folks associated with the USC’s over 2000 vendor companies.
Additionally, the USC’s franchise scheme provides self-employment opportunities to people across the country with a nominal investment. At present USC has 1500 franchise outlets and each franchise employs at least two workers.
USC has a system of bulk breaking and packing of essential commodities e.g. pulses, spices, rice, and sugar in small packs at USC warehouses, where we also provide employment to thousands of people on contract basis.
USC provides large varieties of goods to consumers at lower prices under one roof. USC works on a very nominal profit margin of 6.5 to 8% and its prices are about 20 percent less than the market price. Thus it provides food security to the low income group against high inflation.
E.A. How does the USC provide assistance to national and international relief organizations in case of natural calamities?
The USC has its 6017 outlets and 65 warehouses present in every nook and corner of the country and more than 60 % of our outlets are located in rural areas. What makes me proud is having branches in areas like Chitral, Skardu, Awaran, Balakot, Kashmir, Turbat, Thar and in towns adjoining national borders. We have divided the country in nine zones and our warehouses are always full of essential food items. In case of natural calamities, the USC warehouses are always the first source for supplying food in distressed areas.
In recent earth quake that hit the Awaran district of Baluchistan, relief goods were supplied immediately from the USC warehouse. Similarly, USC was a source of supplies in Thar, Attabad lake incident, 2005 earthquake, floods in 2010 and 2011.
E.A. What role of the USC do you see in the stimulation of national economy?
Utility Stores Corporation of Pakistan is the world’s largest single country retail stores chain. Just to make you understand the scale at which USC operates; let me tell you that the USC is the country’s biggest buyer of grocery items. There are over 2000 registered vendors associated with USC which include companies like Unilever, Gillette Pakistan, Dalda, National Foods, Pepsi International and many others. It may me surprising for you to know that almost 15 percent of the Unilever’s annual sales volume comes from USC only.
Another important thing is that USC prices are the same across the country. This USC system provides a check on price cartels as the dealers in open market cannot sell their products at unjustified difference from that of USC prices.
E.A. The Economic Coordination Committee of the Cabinet (ECC) approved a relief package for the provision of essential food items at subsidized rates during Ramadan. Which products would be subsidized under this package?
The ECC has approved PKR 2 billion relief for the upcoming month of Ramadan. We will ensure uninterrupted availability of essential food items to people during the holy month. In total 18 food items including flour, cooking oil, Banaspati ghee, pulses, white gram, gram flour and dates would be provided at subsidized rates while hundreds of other items would be available at reduced prices at the USC outlets throughout the country.
E.A. Utility Stores run out of stock during Ramadan sometimes. How would you ensure sufficient availability and quality of stock in all of your stores?
There were two reasons for inadequacy of basic kitchen items at the Utility Stores. Before the start of Ramadan, people rush at utility stores to buy products at subsidized rates. The demand increases enormously and stores go out of stock in no time. For instance, last year the average monthly turnover of USC was PKR 5 to 6 billion, whereas it was PKR19 billion in the single month of Ramadan last year. It also shows people’s confidence in the USC and the need for relief it extends. However, to resolve this issue, we have already made appropriate arrangements to meet the expected demand during Ramadan.
Corruption is another reason for the shortage of subsidized items at stores in small towns. As I mentioned earlier, the prices at USC outlets are about 15 percent less compared to the prices in open market. Then the Federal Government also announces big subsidy on basic items for Ramadan that doubles the discount for consumers. The prices of some basic kitchen items i.e. cooking oil, sugar, beverages, gram and gram flour and other pulses cut as much as 30 percent which is sometimes below the distributor price in open market. For example, the price of Dalda cooking oil is PKR194/kg in open market, whereas it is being sold at PKR187/kg at USC stores. After the announcement of Ramadan subsidy, the price of this item goes down to PKR 172/kg, which is 22 rupee less than its price in market and also less than the company’s distributor price. In this situation even the shopkeepers prefer to buy products from USC and we recently found some of our store managers selling subsidized products to the shopkeepers in bulk.
E.A. What measures have you taken to stop the corrupt practices at USC?
I have shown zero tolerance towards corruption. Since I have taken charge, I have laid off some 1,500 employees for reasons like misconduct, illegal appointments and fake education degrees. There were around 150-160 hiring’s by the interim government. Appointment letters to 50-60 people were issued for daily wages with a consolidated salary ranging from 25,000 to 65,000. Daily wages were being misused. Then I dismissed some for misconduct because sales tax invoice wasn’t being given by those employees. Hundreds of corruption cases have been referred to Federal Investigation Agency (FIA) for the legal course of action.
Out of total 6,000 stores, 2,300 stores were making losses, mainly due to their bad market positioning and over staffing of over 1200 surplus employees. I have relocated most of them to good business sites and adjusted their extra staff to big stores and subsequently, majority of them started making profits.
E.A. Have you taken measures to ensure the quality of products being sold at the Utility Stores?
The USC buys items in bulk and break them in small packages at its warehouses. That was the point where some deceitful vendors in coalition with USC staff mixed low quality items in bulk. To stop this practice, we have stopped bulk-breaking of spices, pulses and some other items. Now, the vendors will pack them at their own facility and supply it to USC in packets. Besides USC monogram, the name of vendor would be printed on the packets. This way we have almost eliminated the chances for a vendor to supply low quality product, because each packet displayed at a store comes directly from the factory. According to USC agreement with vendors, the contract will be terminated if the supplied products are lower than the approved quality. Our inspection teams regularly collect specimens from stores and send them for lab tests at National Agriculture Research Center (NARC), Pakistan Agriculture Research Council (PARC) and National Institute of Health (NIH) tests to match it with the approved samples. During the last one year, we have cancelled contracts with a number of vendors on quality grounds and subsequently the complaints regarding quality issues have almost been nullified.
Moreover, we have also made it mandatory for all vendors to submit quality assurance certificate of their products from Pakistan Standards and Quality Control Authority (PSQCA).
E.A. Keeping in view the growing population, what is the future expansion plan of USC?
Currently utility stores are operating in around 74 percent of the union council and there is a plan to open USC outlets in every union council of the country. The PC-1 of this expansion project is under consideration at the Planning Commission. It envisages opening up of 1,000 stores and 30 warehouses across the country. Besides that I have planned to open at least 30 new outlets in some far-flung areas utilizing USC’s surplus budget.
E.A. Is it true that USC is one of the largest tax payers in the country? How much did the USC pay to the national exchequer last year?
Despite working on very nominal profits and even paying rebates to our consumers in far flung areas; the annual turnover of the last financial year was PKR 82 billion. For the fiscal year 2013, the USC paid sales tax of worth PKR6 billion. The USC is not a burden on national exchequer; it’s a self-sustaining organization which meets its running expenses from its profits. I am committed to improve the quality of its products and raising its sales to PKR100 billion this year.
Photography WAHAB SALEEM