Key developments at PSM since Iftikhar-led SC downed its sell-off bid

LAHORE: The state-owned Pakistan Steel Mills (PSM), whose foundation stone was laid in 1973 by the-then Prime Minister, Zulfiqar Ali Bhutto and the construction work was carried out by a consortium of Pakistani firms under the supervision of Soviet experts, has been in limbo for since its privatization bid was halted by Justice Iftikhar Chaudhry-led Supreme Court some 18 years ago.

Not long ago, on November 6, 2023, “Dawn” newspaper had reported: “After removing PSM from the privatization list, the government has assigned its management to consult the Pakistan Institute of Management to re-evaluate core and non-core assets along with legal, fiscal and human resource liabilities, but not before losing more than $18 billion in over eight years of closure.”

On November 28, 2020, the PSM top brass had sacked 4,544 employees as part of its “cost reduction exercise.”

On September 18, 2011, various media outlets had reported that PSM’s liabilities had exceeded Rs110 billion, while its output had plunged drastically due to dearth of raw material and running finance.

Attributing “sources,” the “Daily Dawn” had gone on to write: “During the eight-year period between 2000 and 2008, the PSM remained in profit and paid off all its previous debts, but since then it has been incurring losses. The PSM, which had attained 88-90 per cent capacity utilization in 2007-8 and 2008-09, had been on a slide for two years and reached a 25 per cent capacity utilization in July this year. It plummeted further to 18 per cent in first 15 days of the current month (September 2011).”

The newspaper had added: “This Company, which has a capacity to produce about 3,000 tons of various products, is now producing only 450-500 tons. Its sales’ revenue, which had been hovering around Rs5 billion a month in 2007-8, dropped to Rs2.5 billion in July 2011, Rs1.3 billion in August and Rs750 million by September15, mainly because of shortage of raw material. Besides, the PSM’s immediate liability stands at Rs60 billion and its financial losses have exceeded Rs50 billion – taking the total payables to a whopping Rs110 billion.”

In April 12, 2012, as archives further reveal, the PSM was denied Rs9 billion bail-out package by the government.

We all know that in 2006, the plan of the-then Premier Shaukat Aziz to sell out PSM was halted when the “Watan Party” had filed a petition in the Apex Court, citing irregularities in the process.

On June 23, 2006 2006, the Supreme Court had viewed in an 80-page verdict that the entire disinvestment process of the Pakistan Steel Mills reflected haste, ignoring the profitability aspect and assets of the mills by the financial adviser before its evaluation.

A bench of the Supreme Court headed by the-then chief justice Iftikhar Chaudhry had struck down the PSM privatization. This was the time when the Pakistan Steel Mills losses were approaching Rs400 billion.

The-then Chief Justice had held that a number of incentives were given to the successful bidder that had not been disclosed in advance.

These, according to the verdict, included: a) stock in trade worth about Rs10bn, b) the commitment of the government of Pakistan to clear the loan liability amounting to Rs7.67bn, c) the refund of Rs1bn paid as advance tax to the government, d) responsibility was accepted by the government to meet the claim of the workers opting for a voluntary separation scheme (VSS) amounting to about Rs15billion.

Earlier, on June 1, 2006, the “BBC” had reported: “Pakistan Steel is the latest state company to be fattened up for privatization and sold off to a foreign bidder. Spread over 29 square miles, the sprawling steel complex is based near Port Mohammad Bin Qasim, where two 4km-long conveyor belts transport the raw materials used for steel production to the factory. The sale was resisted by unions and sparked lengthy debates in parliament, which members of the opposition walked out of in disgust. They argued that at $362million, the government’s 75% stake in the company was sold off too cheaply - and it should have kept hold of such a strategic asset.”

Current financial state:

PSM, which once had 30,000 people working for it, had estimated losses of Rs22.4 billion as of June 30, 2023, while gas obligations stand at a whopping Rs33.5 billion.

According to PSM’s Chief Financial Officer, the financial burden of employees’ salaries currently rests at Rs3.1 billion annually. Moreover, natural gas worth Rs7 billion had been consumed during the last decade.

In 2010, the CFO added, the government decided to regularize the employment of 4,500 employees, which resulted in an additional cost of Rs2 billion.

The Secretary of Industry and Production has said that the Sindh government has been offered to take over 700 acres of the total 19,000 acres land of the PSM and establish its own steel plant on the site.