Vested interests want PSM scrapped despite foreign investment offers

ISLAMABAD: Despite receiving multi-billion-dollar investment offers, certain groups with vested interest within Pakistan’s political and industrial elite are pressuring the government to declare Pakistan Steel Mills (PSM) facility as ‘scrap’ and dismantle its facilities, eyeing its 19,000-acre prime land.

The government has yet to decide on PSM’s fate. However, foreign investors have recently expressed strong interest in revitalising the mill and expanding its production capacity, a senior official source in the federal bureaucracy told The News on Monday.

The largest state-owned industrial facility in Pakistan, PSM was constructed by the Soviet Union in the 1970s and was closed in June 2015. Since then, various governments have received foreign investment offers, but none has materialised. Last October, the steel mill was removed from the privatisation plan, leaving its future uncertain.

Recent discussions in the National Assembly Standing Committee on Industries and Production have highlighted severe financial mismanagement and a lack of direction at PSM. During a committee briefing on July 26, 2024, the ministry described PSM as a “piece of scrap,” suggesting its revival is nearly impossible.

This assessment was met with strong opposition from the labour union and the PSMC Stakeholders’ Group. On July 27, these groups sent a detailed letter to the Chairman of the National Assembly Standing Committee and the Secretary of the Ministry of Industries and Production. They argued that the ministry’s portrayal of PSM is misleading and fails to recognise the potential of local talent in reviving the steel mill. The letter is available with The News.

The stakeholders believe that PSM can be fully revived with proper management and technical expertise. They have previously written to the Ministry of Industries and Production (MOI&P) and the Prime Minister, emphasising that foreign investment could restore PSM’s profitability if mismanagement and a lack of professional leadership are addressed.

PSM’s financial decline has been dramatic, with accumulated losses exceeding Rs224 billion by June 2023. The mill’s debts have surpassed Rs335 billion, while its assets are valued at over Rs830 billion. In contrast, PSM recorded a profit of more than Rs9.6 billion in June 2008, underscoring the extent of its financial deterioration.

The stakeholders criticised proposals to develop Export Processing Zones (EPZ) and Special Economic Zones (SEZ) on PSM’s land, describing them as repetitive and unapproved by the Council of Common Interest (CCI). They argue that previous efforts from 2005 to 2024 failed to address the core issues of privatisation at PSM, a profit-generating entity that ultimately faced severe financial distress.

From 2008 to 2024, PSM incurred losses exceeding Rs700 billion due to rising debts and liabilities, impacting the national economy with losses exceeding $18 billion. These financial strains were attributed to incentivized policies, discriminatory tariffs, mis-declaration, and smuggling.

The stakeholders argue that blaming PSM’s failure on its workers and stakeholders is unjust. They contend that the performance of PSM relied heavily on the techno-commercial knowledge, planning, and priorities of officials appointed by the MOI&P or the government, who often lacked the necessary expertise and oversight.

They have called for an investigation into the appointment of non-professional officials, which they believe led to costly mistakes and mismanagement at PSM. Additionally, they have requested the NA Committee to visit PSM to assess the situation firsthand and determine the mill’s future.

The stakeholders also suggested the parliamentary panel ask questions from the Ministry of Industries and Special Investment Facilitation Council (SIFC) about the consultant who recommended replacing PSM with Export Processing Zones, the appointment of the CEO, and the unutilized $95 million credit facility from the USSR (now Russia).

Further concerns include the dismissal of an Austrian company’s proposal to increase PSM’s production capacity from 1.1 million tons per year to 3 MTs. The proposal included a “Buy Back Product at International Market (Metal Bulletin) Price” for 2004-05. Instead, the government opted for privatisation.

Another point of scrutiny is the obstacles faced by the Privatisation Commission in privatising PSM from 2005 to 2024 and the book value of PSM shares as of June 2024 compared to December 2006.