PSM mulling partial revival of operations: official

KARACHI: Pakistan Steel Mills (PSM) is planning to reactivate some of its mills/facilities to generate revenues until a strategic partner agrees to take control of the country’s only mill that can convert iron ore into steel, an official said on Monday.

“… we plan partial revival i.e. restart certain mills and facilities such as the fabrication, molding and coal jetty for commercial operations and tool manufacturing,” said Aamir Mumtaz, chairman PSM, while talking to newsmen.

“We are already in talks with auto manufacturers, tinplate producers and other companies, which are interested in using our mills and facilities.”

Mumtaz said the government had decided to hand over the strategic asset to a consortium of investors, EPC (engineering, procurement and construction) contractor and operator on ROT (repair, operate, transfer) basis.

“We have received interest from Russian, Chinese and Turkish companies, while some more offers probably from Europe and America are also expected in this week.”

A due diligence exercise was underway and the report in this regard was expected in six months, the chairman added. Mumtaz clarified the PSM was not being privatised and the government would remain the owner of the company. “Given the projected growth in steel demand, more than 50 percent share in profits and certain other exemptions such as import tariff concessions, we are confident to find the type of partner we are looking for.”

He added that as per the plan, the strategic partner would bring in operating/working capital to start the mills, operate and expand the capacity to 3 million tons from existing 1.1 million tons. “According to our estimates, an investment ranging from $500 million to $1 billion is required to revive the PSM and enhance the capacity.”

Chairman PSM said the assets of the PSM including the coal jetty, lands, guest houses etc, had been separated from the operating part of the company i.e. furnaces and mills, and the partner would only be entrusted with the responsibility to revive and operate the mils. Mumtaz further said the consortium (strategic partner) would bring its own team, and also hinted at a massive right-sizing as the PSM is heavily overstaffed. “The PSM employs over 9,000 personnel, most of which are political appointees. We need to fix this situation and appoint the right person for the right job,” the PSM head said.

The PSM is nonoperational since June 2015 owing to multiple reasons, while its total losses and liabilities have surpassed Rs480 billion by January 2019.

Since 2015, the salaries of thousands of employees and fixed overheads were being met through “bailout packages” from the federal government without any output from the PSM. According to Ministry of Industries and Production, the total bailout packages given to the mill were worth Rs87.611 billion till October 2019.

The PSM was a public limited company with a production capacity of 1.1 million ton per annum. Until the aforementioned date, its total assets were worth Rs149 billion, total liabilities Rs219 billion, accumulated losses Rs207 billion, while its net worth was figured at Rs70 billion.