The nation, once proud of its large, coastal-based Pakistan Steel Mills (PSM) with an annual capacity of over one million tons, now witnesses its complete dismantling -- a victim of short-sighted government policies, lack of vision, and vested interests. Once seen as a symbol of industrial strength, the Pakistan Steel Mills is now on the verge of collapse, sealed by years of negligence and mismanagement.
The nation, once proud of its large, coastal-based Pakistan Steel Mills (PSM) with an annual capacity of over one million tons, now witnesses its complete dismantling -- a victim of short-sighted government policies, lack of vision, and vested interests. Once seen as a symbol of industrial strength, the Pakistan Steel Mills is now on the verge of collapse, sealed by years of negligence and mismanagement.
Pakistan Steel was initially established in the 1970s with the help of the then-Soviet Union and was a cornerstone of Pakistan's industrial sector. It was expected to make the country self-sufficient in steel production, reducing reliance on imports, and supporting national industries. For a while, it delivered on these expectations. However, the steel mills' fate was cast into uncertainty as it landed on the privatisation list in the early 2000s. After nearly two decades of privatisation talks, its final fate has now been sealed, with the government's decision to scrap the PSM entirely.
The privatisation process, which was moving toward a conclusion by the end of 2023, was abruptly halted by the caretaker government in December 2023. The intention was to rehabilitate and revitalise the steelmaking facilities that had been shut down since June 2015, transferring the mills back to the Ministry of Industries and Production. Yet, no tangible progress followed. This indecision, coupled with a failure to act, left the mills in limbo. In a surprising turn of events, the second Shehbaz Sharif government, which took office in March 2024, reversed the caretaker government's decision and opted for the complete closure and scrapping of the mills. This decision was taken without any convincing explanation, at a stage when privatisation was almost complete.
Ironically, just a few months later, the federal minister for industries and production announced plans to install a new steel mill on 700 acres of PSM land, in collaboration with Russia. This move raises an important question: if the government is now serious about a partnership with Russia, why were the Russian companies that had previously shown interest in privatizing PSM not considered earlier? Among the interested parties were five major Russian companies, including Tyazhpromexport, Severstal, Mechel Group, and Magnitogorsk Iron & Steel Works, all of whom had expressed interest in acquiring a controlling stake and upgrading the mill’s technology.
The saga of PSM privatisation has been long and contentious. The first serious attempt at privatisation occurred in 2005-06 when the PSM was still profitable. A consortium of Saudi, Russian, and Pakistani companies reached an agreement to buy the PSM for $362 million. However, the Supreme Court of Pakistan intervened and blocked the sale, citing concerns about undervaluation and transparency, reportedly due to political pressure. This marked the beginning of the financial decline of the PSM. Over the next decade, various governments attempted to privatize the mills again, especially after the shutdown of operational activities in 2015, but with little success.
In the meantime, the Pakistan Steel Mills continues to bleed financially. Despite the heavy losses, a new chief executive was appointed, and an 11-member board of directors was constituted in September 2024, seemingly not to rehabilitate the PSM but to oversee the dismantling of the massive complex. The cost of maintaining these top officials continues to rise, even though the mills have been non-operational for years.
The government must act swiftly. It should explore partnerships with private investors, both domestic and international, to modernise the PSM under new financial models. But time is of the essence
Currently, 2,415 employees are still on the payroll, further draining resources. According to the latest audited accounts for the year ending June 30, 2023, the PSM recorded a net loss of R 25.45 billion, with accumulated losses reaching a staggering Rs224.63 billion. This financial haemorrhage underscores the government's failure to prevent further losses or take decisive action.
The PSM was not always in this state. Between 2001 and 2005, Pakistan Steel was profitable, having recovered from earlier losses and earning Rs4.86 billion in accumulated profit by 2005. Production capacity surged to 94 per cent in 2003-04, showing the potential for a full recovery. However, corruption, financial mismanagement, and lack of accountability in subsequent years led to its downfall. Despite this, those responsible for plundering the steel mills have largely escaped punishment.
Copper, brass, and other valuable materials worth Rs10 billion have been stolen over recent years, with FIRs filed but no outcomes achieved. Even before the PSM's closure in 2015, the illegal occupation of its land had begun. In 1996, a powerful individual illegally occupied eight acres of prime PSM land, constructing a petrol station, with no action taken by PSM management.
The Pakistan Steel Mills was originally allotted 19,013 acres of leasehold and freehold land. The main plant and services infrastructure occupy 1,675 acres, with an additional 8,270 acres reserved for future expansion. However, the looting of this valuable land has accelerated in recent years. In 2007, the Sindh government unlawfully seized 1,377 acres, prompting a lawsuit by PSM in the Sindh High Court in 2014; the court decision is still awaited. The land was later transferred by the provincial government to private parties under dubious circumstances.
Additionally, 930 acres of freehold land were leased by PSM for 60 years to the National Industrial Park Development & Management Co (NIP), a public-private partnership, which transferred the land to various companies for establishing medium- and small-sized industries. In 2014, out of this land 50 acres were given to a Japanese automaker, 100 acres in 2019 to a Korean motor company, and 97 acres to domestic entrepreneurs. This continued erosion of PSM's core assets has added to the steel mill’s woes.
The fate of the Pakistan Steel Mills represents more than just the closure of an industrial giant; it is symbolic of the wider failures in industrial policy and governance in Pakistan. Resurrecting the steel mills is not only about reviving a defunct entity but also about the strategic importance of steel production for the country's industrial growth. The PSM has the potential to once again play a pivotal role in the national economy if rehabilitated and modernized with the right investments and management.
The government must act swiftly. It should explore partnerships with private investors, both domestic and international, to modernise the PSM under new financial models. But time is of the essence; continued delay only deepens the losses and diminishes the chances of a successful revival. The PSM’s downfall serves as a warning of what can happen when corruption, poor governance, and lack of vision take precedence over national interest.
The writer is a retired chairman of the State Engineering Corporation and former member (PT) of the Pakistan Nuclear Regulatory Authority.
