The Economic Coordination Committee (ECC) of the federal cabinet on Thursday approved a Rs. 30.216 billion technical supplementary grant to facilitate the orderly closure of the Utility Stores Corporation (USC), ending decades of government-backed retail operations across the country.
The decision, taken during a meeting chaired by Finance Minister Muhammad Aurangzeb, aims to responsibly address the Utility Stores’ longstanding financial burden on the national exchequer while protecting the rights of thousands of employees through compensation and severance payments.
According to the Ministry of Finance, the approved grant will cover severance benefits, outstanding dues, and other entitlements under a Voluntary Separation Scheme, allowing for a smoother transition as the USC winds up operations.
Transparent process
The ECC directed the Ministry of Industries and Production to rationalize financial requirements and ensure the disposal of the Stores’ assets, including properties, within the current fiscal year. The sale of these assets is expected to partially offset the cost of closure.
The cabinet body emphasized that the process must be transparent and accountable, highlighting the need for strict oversight in both financial disbursement and asset disposal. The government has reiterated its dual focus on fiscal discipline and employee welfare throughout the process.
Mounting losses
Established in 1971 to supply essential food items at subsidized rates, the Utility Stores expanded significantly during the 2007 retail push, growing its outlet count from 1,023 to 5,557 and workforce from 3,892 to 12,749 by 2009. However, the corporation began posting continuous losses after 2013.
In FY2024 and FY2025, the corporation posted cumulative losses of Rs. 15.5 billion and Rs. 16 billion, respectively. By June 2025, accumulated losses had reached Rs. 23.8 billion, making it increasingly difficult for the government to justify continued subsidies.
In August 2024, the federal cabinet placed the Utility Stores on the privatization list and withdrew all subsidies. By December, the corporation’s board approved a rightsizing plan, reducing the number of stores from 3,742 to 1,904 and employees from 11,614 to 7,710. Still, projected losses remained at Rs. 8.3 billion annually.
Final closure
On June 28, 2025, Prime Minister Shehbaz Sharif was presented two options: continue operations with a Rs. 14 billion bailout or initiate a complete closure. The prime minister opted for the latter and formed a committee under the finance minister to manage the process.
Following formal approval by the Stores’ board on July 2, the company shut down over 1,000 rented stores and 1,230 franchise outlets. Nationwide operations ceased on July 31, with remaining inventory shifted to warehouses.
By Aug. 31, the majority of the Stores’ remaining workforce would be laid off. However, 832 employees would be retained from September to November 2025—at a cost of Rs. 210 million per month—to manage stock reconciliation, audits, and ongoing litigation. From December 2025 to June 2026, the workforce will be reduced to 326 employees, with a monthly cost of Rs. 115 million, to oversee property sales and other residual functions.
The closure marks a significant policy shift in Pakistan’s approach to retail market regulation and subsidy reform. The government maintains that the move is part of broader efforts to promote fiscal responsibility, reduce public sector inefficiencies, and encourage private-sector-led growth.