Sindh looks for more time to decide on PSM acquisition

Federal govt had given January 21 as deadline, province says it will file comprehensive reply in one month

ISLAMABAD:

The stand-off between the centre and Sindh continued, as the provincial government has sought more time for making a decision on the proposed acquisition of Pakistan Steel Mills (PSM).

The federal government had given Sindh January 21 as the deadline to either accept or reject the offer to acquire the country’s largest industrial unit, which is close to zero utilisation for the last seven months due to multiple issues. In October last year, the government had offered PSM to the Sindh government.



The tussle

Last week, the provincial government called a meeting to discuss the federal government’s response to queries raised by the Sindh Finance Department. Pakistan Peoples Party’s Senator Saleem Mandviwalla said that the Sindh government was willing to ink an agreement with the federal government to transfer the PSM assets to them.

He said that the provincial government has received a reply from the Privatisation Commission (PC) that only provided half of the information to the Sindh government.

The Sindh government will submit a comprehensive reply in this regard to the PC within one month, he added, saying the federal government cannot dictate and give a deadline to the provincial government.

He also added it was not possible for the provincial government to reply in one week.

The senator said that the replies submitted by the federal government showed that the financial advisor of the PSM has not prepared a transaction structure for privatisation. It has also not shared any tax policy incentive that the federal government may offer to the buyer of the PSM, he added.



Senator Mandviwalla stated that the PC has also not shared any revival plan with the provincial government.

The PC’s reply indicated that the federal government wanted to privatise the PSM in running condition -a commitment that will require billions of rupees injection as the unit was currently running below 1% capacity.

PSM is close to being shut down despite an injection of over Rs22 billion by the government for enhancing capacity utilisation to 77%.

He said that the federal government should take up the matter with the Council of Common Interests (CCI), seeking support of the provincial governments for the transfer of PSM from federal to the provincial government.

Matters remain murky

Senator Mandviwalla said that the PC reply showed that the PML-N government has not deliberated the PSM privatisation matter in the CCI, as the last approval was sought in 2006 after the decision of Supreme Court of Pakistan.

The federal government has put the privatisation of PSM on hold after it decided to offer the industrial unit to the provincial government.

Pakistan Steel Mills is a nightmare: Privatisation Commission chairman

“Should this offer be declined, the privatisation process can be completed by end-September 2016,” according to a Letter of Intent that Finance Minister Ishaq Dar submitted to the IMF for seeking the tenth loan tranche of $498 million.

The federal government had hoped that it would receive the final response to the offer from the provincial government by end-December 2015.

The approval of the PSM privatisation transaction remains pending by the Cabinet Committee on Privatisation. Earlier, Dar had picked a major discrepancy in the transaction structure of PSM, which the Board of Privatisation Commission had approved earlier.

In its draft illustrative balance sheet as of June 30, 2015, which was presented to the PC Board, the FA had shown the total assets of the PSM at Rs243.5 billion. The balance sheet did not mention Rs33 billion contingent assets. By including Rs33 billion deferred tax assets, total assets amounted to Rs276.5 billion.

Of the assets, the FA had estimated the value of land at Rs150 billion, which it suggested should remain with the federal government. It proposed that the remaining assets of Rs93.5 billion or 38% of the total assets should be transferred to the buyer.

The FA had estimated total liabilities at Rs183.5 billion, recommending that the government should pick Rs142 billion liabilities.

Published in The Express Tribune, January 19^th, 2016.

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