In a recent move, the government has decided to rehabilitate and restructure the ailing Pakistan Machine Tool Factory (PMTF), delisting it from the privatisation process being adopted for the state-owned-enterprises (SOEs). Major policy measures are in hand to make the company viable and healthy for a long term, and accordingly a revival plan is to be prepared by the ministry of Industries and Production.
In a recent move, the government has decided to rehabilitate and restructure the ailing Pakistan Machine Tool Factory (PMTF), delisting it from the privatisation process being adopted for the state-owned-enterprises (SOEs). Major policy measures are in hand to make the company viable and healthy for a long term, and accordingly a revival plan is to be prepared by the ministry of Industries and Production.
PMTF, an industrial unit of the State Engineering Corporation, was established in 1968 in Karachi as a precision high-tech engineering goods manufacturing enterprise. The facility was created for indigenous manufacturing of machine tools under technical collaboration and technology transfer agreements with the world-renowned machine tool manufacturers Oerlikon-Buhrle of Switzerland. Regular commercial production commenced in 1971, without major orders in hand for machine tools. Subsequently, PMTF produced a significant number of machine tools, in addition to other precision products and armaments. Over a period of years the design and manufacturing capabilities at PMTF were upgraded and modernized a number of times.
PMTF has integrated production facilities for forging, machining, press die-casting, heat treatment, surface treatment, material testing, product designing, tool designing, tool room shop, sheet-metal and welding shop, CNC shop and machine rebuild shop. Besides the conventional and NC (numerical control) machine tools, PMTF manufactures and markets the sophisticated automated products such as CNC (computer numerical control) milling machine, CNC lathe, CNC turning center and DTH (down-the-hole) drilling machine. The diversified products range includes automotive transmission parts, die-cast parts, and a variety of armaments.
Since 2007-08 the cash-starved company has accumulating losses of billions of rupees, in spite of orders in hand. The short-sighted policies of the government and long and unsuccessful privatisation process over the decades have adversely affected company’s performance, turning it into a sick unit for quite some time. A restructuring plan was presented by the management to the government in December 2011, but, unfortunately, it was not approved. Instead, the government had decided in February 2012 to privatise the strategic unit, this time proposing divestment under public-private partnership (PPP) mode.
Currently, the operations of PMTF are at standstill primarily due to financial constraints, and thousands of its employees have not been paid their salaries since long. The government has now approved Rs 833 million for payment of salaries of the employees for the months of September and November 2018 and outstanding dues of retired employees. Most of the highly-skilled engineers and technicians have left the company in recent past as a result of voluntary separation scheme (VSS) offered to the employees repeatedly.
The revival or restructuring plan needs to cover all aspects and to address these issues effectively and timely. The first and foremost requirement is financial restructuring of the company and cash injection in equity. Second, preparation of a comprehensive and realistic business plan for medium and long term period, identifying a diversified product range. Third, selection of an international manufacturer of machine tools for partnership under licensing arrangement. Fourth, upgrading, balancing and modernization of the existing installed plant machinery that has been depreciated. The other grey areas of the company should also be addressed. For example, working methods and procedures need to be reviewed and placed on modern lines. Induction of highly skilled engineers, technicians and other professionals will be essentially required.
Machine tools are a wide range of machinery employed for cutting, removing or forming the metal to produce components for assembly into a single machine. Termed as strategic for any country, machine tool industry is essential for reproducing the technologies and adaptations of advanced state-of-the-art processes. The industry serves as precursor to the process of industrialization as machine tools are widely used in capital goods, automotive, consumer-durables, railways, aviation and aerospace, ship-building, defense, electronics, atomic energy and IT-related manufacturing sectors.
Globally, machine tools market is of the size of $83 billion, growing steadily, and projected to be $138 billion by 2026. India, with 25 units in six regions in large sector only, is one of the leading producer of machine tools, ranking 12th in production worldwide. Indian domestic market for machine tools is $1.8 billion, whereas it exports valuing over $55 million.
The Pakistan Business Council (PBC) in its December 2018 Report has made recommendations to the government for shifting its policy towards industrialisation. One of major recommendations for promoting import substitution and export enhancement is to establish a machine tool factory in private sector under a joint venture with a large international manufacturer. The detailed report emphasises the significance of machine tool industry for enhancing Pakistan’s technological capabilities, as investment in this industry develops skilled workforce, creates self-reliance, and enables economy to produce a wide range of industrial components.
Unfortunately, the private sector has never come forward to invest in this capital-intensive field in formal sector due to low return on investment and lack of government support for the engineering industry. PMTF was offered in December 2007 to the investors to take-over and run the company operations but there was no response.
The writer is former chairman of the State Engineering Corporation
