PSM assets worth Rs860bn lie dormant, Senate panel told

ISLAMABAD: The Pakistan Steel Mills holds assets worth Rs860.99 billion but has remained non-functional due to the inaction of successive governments since 2015.

Despite substantial value of its assets, no serious efforts have been made to revive this industrial giant built by the Soviet Union in 1970s.

The mills, once a cornerstone of Pakistan’s industrial sector, has faced a decline over the past decade. Lack of operational activity and governmental neglect has contributed to its current state.

Critics argue that the failure to revive the mills represents a significant oversight in national economic policy. Since 2015, various administrations have been accused of not prioritizing the mill’s reactivation.

Last October, the government decided to cancel its privatization due to the waning interest of the Chinese companies, largely influenced by the declining global steel demand.

Officials Wednesday revealed the steel mills assets details in the Senate Standing Committee on Industries and Production convened here under the chairmanship of Senator Aon Abbas.

The mills CFO, Muhammad Arif Sheikh, informed the committee that the organization possessed movable and immovable assets of Rs860.99 billion, comprising Rs2.12 billion in movable assets and Rs858 billion in immovable assets.

He disclosed that the movable assets include machinery and vehicles valued at Rs1.45 billion. The valuation of the land was conducted in 2021, meeting all legal requirements.

The committee was informed that the organization owned 500 vehicles, including buses, cars, and security vans, with 350 in working condition. Out of 18,000 acres, 8,000 acres are occupied by the residential colonies and remaining by the plants. It was informed that 1,500 acres will be used for CPEC purposes.

The mills’ land is worth Rs622 billion, with the land allocated for investment valued at Rs63 billion. The factory buildings are valued at Rs43 billion, non-factory buildings at Rs2 billion, and railway tracks and bridges at Rs2.2 billion.

The committee requested further details on railway tracks and engines for the next meeting.

The committee was informed that the mills plant and machinery were worth Rs115.7 billion, with gas and electricity installations worth Rs2.7 billion and the water and sewage system at Rs1.99 billion. The mills consumes 200 million gallons of water monthly and has an efficient sewage system. Gas supply was halted after June 30, 2024.

For the Financial Year 2022-23, the organization earned Rs5.65 billion, including Rs2.71 billion from scrap sales. Expenditures totaled Rs33.11 billion, resulting in a Rs25 billion loss.

Regarding administrative expenses, the committee learned that labor costs amounted to Rs2.1 billion, down from Rs2.9 billion the previous year and significantly lower than the Rs4.9 billion from the year before that. The organization received a grant of only Rs6 billion.

In response to Chairman Senator Aon Abbas’s query, it was disclosed that the government provided a Rs104 billion loan, with an additional Rs38 billion from the National Bank of Pakistan. Of the total loan, Rs103 billion has been paid as mark-up. The committee was informed that over 500 daily wage and contract employees were not granted extensions on June 13, 2024, with details requested by the committee.

Over the past ten years, 12,382 employees have left the mills, including retirees (5,701), terminations (128), resignations (359), medical grounds (39), voluntary separation scheme (397), and deceased (577). Of these, 4,588 were officers and 7,794 were workers.

Currently, the organization employs 2,286 personnel, including 166 officers and 2,120 workers, with an annual salary expenditure of Rs1.67 billion.

The employees received Rs32 billion in salaries over the past decade, with Rs7 billion spent on gas during that time.

CFO Arif Sheikh informed the committee that upon joining in 2011, the mill operated at 36 percent capacity, nearly shutting down. From 2000 to 2008, it was profitable, averaging 80% capacity. In 2009, international banking issues led to Rs26 billion loss, investigated by NAB and the Supreme Court.

The committee has sought all inquiry reports related to Pakistan Steel Mills and learned of a 2009 commercial loan from the government at 15 percent interest, with Rs6.5 billion in LC payments. Production capital decreased due to insufficient funds.

Regarding employees, the mills had 27,000 in 2009, up from 20,000 in 2008, with a need for 7,000. In 2010, the government ordered the regularization of about 4,000 daily wage and contract employees, costing Rs12 billion.

The secretary industries and production clarified that the government-ordered recruitment was not illegal. Plans for privatization have been amended, with no current buyer and federal cabinet approval to scrap and repurpose the mills land. Permission is needed from the Sindh government for alternate land use. He said obtaining permission from the provincial government was necessary to use its land for alternative purposes.

A decision has also been made to utilize the land for an export promotion zone/industrial zone. The committee was informed that the caretaker provincial government had previously granted permission to the federal government to use its land. The current government has reviewed the federal government’s decision. The Sindh government wants to establish a new steel mill which, if built, will occupy 700 acres while the rest of Pakistan Steel Mills’ land will retain its name.

The decision awaits approval from the Sindh cabinet. Efforts to sell high-quality steel as ‘C’ category were unsuccessful. The Steel Mills union seeks clarification on employee ownership and revival prospects, disputing the provided figures and land use plans. Senator Saifullah Sarwar Khan Niazi noted the absence of the mills CEO.