On December 22, 2023, the Senate Standing Committee on Industries and Production discussed the challenges being faced by the Pakistan Steel Mills (PSM) in Karachi and decided that immediate plans for restoration of production activities at the mills be presented to the Committee in its next meeting. The caretaker government has taken Pakistan Steel Mills off the privatization list in October, having directed the Ministry of industries and Production to revive the state-owned enterprise but there has been no headway so far.
On December 22, 2023, the Senate Standing Committee on Industries and Production discussed the challenges being faced by the Pakistan Steel Mills (PSM) in Karachi and decided that immediate plans for restoration of production activities at the mills be presented to the Committee in its next meeting. The caretaker government has taken Pakistan Steel Mills off the privatization list in October, having directed the Ministry of industries and Production to revive the state-owned enterprise but there has been no headway so far.
Pakistan Steel Mills, once a symbol of industrial prowess and economic growth, has faced a tumultuous journey in recent years. The challenges it has encountered, including financial woes, mismanagement, and technological obsolescence, have left this giant steel complex non-functional. However, the need for its revival is more crucial than ever, as it holds the potential to play a pivotal role in revitalizing Pakistan’s industrial landscape. The stakeholders need to explore the possibilities and strategies for breathing new life into the dormant Pakistan Steel Mills on priority.
The Rise and Fall
Established in the 1970s, Pakistan Steel Mills was envisioned as a catalyst for economic development. With its massive production capacity and integrated steelmaking facilities, it aimed to meet the country’s growing demand for steel and contribute significantly to the GDP. The mills, however, fell victim to a combination of factors, including political interference, financial mismanagement, corruption, and an inability to adapt to changing global markets.
Today, Pakistan Steel Mills stands as a colossal structure, reminiscent of better times. The once-bustling complex has fallen silent, with machinery gathering dust and the workforce reduced to a fraction of its former strength. The financial burden on the national exchequer and deindustrialization due to the continued non-functionality of the mills is significant, making the case for revival even more urgent.
Financial Challenges and Restructuring
The financial challenges faced by Pakistan Steel Mills are daunting, requiring a comprehensive restructuring plan. As the efforts to privatize the industrial giant have failed a number of times, the government, in collaboration with private investors, should explore innovative financial models and public-private partnerships to infuse the necessary capital. This approach would not only alleviate the burden on the national exchequer but also bring in managerial expertise from the private sector to streamline operations.
Technological Upgradation
To compete in the global steel market, technological upgradation is imperative. The outdated machinery at Pakistan Steel Mills needs to be replaced with state-of-the-art equipment that ensures efficiency, cost-effectiveness, and environmental sustainability. Investing in research and development for the latest steelmaking processes will not only enhance productivity but also position the mills as a modern, competitive player in the industry.
A crucial aspect of reviving Pakistan Steel Mills, which is not being divested now, is investing in the skilled workforce. The experienced personnel who were part of the mill’s glory days must be brought back or adequately compensated to ensure the transfer of institutional knowledge. Simultaneously, training programs should be initiated to equip new hires with the skills required for modern steel production techniques. This investment in human capital will not only restore the workforce but also contribute to the overall skill development in the country.
Once operational, Pakistan Steel Mills should actively seek to diversify its product range and explore untapped markets. The mills can capitalize on its strategic location by targeting export markets in the Middle East, Central Asia, and beyond. By establishing strong international partnerships and leveraging the potential of the China-Pakistan Economic Corridor (CPEC), the mills can become a regional hub for steel production and trade.
Environmental Sustainability
An integral part of the revival plan for Pakistan Steel Mills should include environmentally sustainable practices. Implementing eco-friendly technologies, waste management systems, and adherence to international environmental standards, which will not only mitigate the environmental impact but also enhance the mills’ reputation as a responsible and modern industrial entity.
Missed Opportunity
The nation lost an excellent opportunity, in 1998, to restructure, rehabilitate, and modernize the Pakistan Steel Mills, and to make it viable, financially and commercially. Based on various economic and technical studies including that of the Nippon Steel Corporation of Japan, the government’s high-level task force on the Pakistan Steel Mills had made recommendation of increasing the existing annual installed capacity to three million tons with diversification of its products, shifting the emphasis from its present production of long and flat products to high-grade products and additional products like the deep-drawing, tin-plate and electrical steel sheets etc. Proposals were invited from the Chinese and Russian companies and the Chinese offer was considered agreeable. Subsequently, Brig (Retd) Muhammad Asghar Minister for Industries and Production led a delegation (the writer was a member of delegation) to China in 1996 to firm-up commercial proposal of the Chinese company at government-to-government level, and preliminary documents were signed. Then, President Farooq Leghari during his state visit to China in April 1997 proposed to the Chinese President that the two sides should enter into a joint venture for the up-gradation, expansion and management of the Pakistan Steel Mills.
Latest Technology and Investment
Consequently, another delegation headed by M. Zubair Kidwai, Federal Secretary, Industries & Production, of which the writer was also a member, visited China during January 18-25, 1998, with the objective to conclude an agreement with the Chinese which was to be signed during the visit of Prime Minister Nawaz Sharif to Beijing following month. After extensive and prolonged discussions, the delegation had with the Chinese Minister of Metallurgical Industry and Chairman of the China Metallurgical Group Corporation (MCC) the agreement, in two comprehensive volumes, was finalized and initialed between the two sides. The Chinese had finally agreed to the most attractive package, financial as well as technical, for executing joint venture for Pakistan Steel Mills.
Based on latest steelmaking technology, the package negotiated with the Chinese was very attractive having met all the requirements of the Government of Pakistan, including $100 million equity participation in the mills, and investment of $1.5 billion in expansion project with provision of $850 million soft loan or state credit. A large portion of precision mechanical and critical electrical & electronic equipment to be supplied would have been of the Western/Japanese origin. This agreement, though scheduled for signing along with other agreements during the visit of Prime Minister Nawaz Sharif during February 1998, was not signed somehow. No reason was ever given to the Chinese, or to the Pakistani stakeholders, as to why this item on agenda, which was finalized and agreed to jointly by the two sides, was deleted by the Pakistan side at the last moment. Surprisingly, there was no follow-up either.
Conclusion
The revival of Pakistan Steel Mills is not just a matter of resurrecting a dormant industrial giant; it is a strategic imperative for the economic growth and stability of Pakistan. By addressing financial challenges, investing in technology, and fostering international collaborations, the mills can once again become a symbol of industrial prowess. The elected government, to be formed as a result of February 6, elections, should take up the matter on top priority. The journey toward revival of Pakistan Steel Mills will undoubtedly be challenging, but the potential benefits for the nation far outweigh the difficulties. As Pakistan embarks on this transformative journey, the revitalization of Pakistan Steel Mills in Karachi stands as a testament to the resilience and determination of a nation to reclaim its industrial glory.
The writer is retired chairman of the State Engineering Corporation
