The Central Development Working Party is likely to recommend awarding Rs30 billion contract of Pakistan Steel Mills expansion project to Russian state-owned company in its meeting tomorrow (Friday).
Under the expansion project, the capacity of Steel Mills will be enhanced to 1.5 million tons annually from existing 1.1 million tons. The initial cost of the project has been estimated at Rs30.45 billion, while the actual cost will be determined after technical audit of the plant is carried out by the Russian firm.
Russia has linked its financing for Pakistan Steel Mills expansion project with award of contract to its state-owned firm VO Tyazhpromexport.
After CDWP – a body of Planning Commission – gives a go-ahead, Ministry of Production will then sought the final approval from Executive Committee of National Economic Council (Ecnec).
Sources maintained that after seeking approval from the apex body, Pakistan and Russia will sign Memorandum of Understanding (MoU) under which Russia will finance $350 million for Pakistan Steel Mills expansion project. The MoU is currently being finalised between two countries.
Under the agreement Pakistan will award contract to Russian firm without going into a bidding process, a step that may raise serious questions over transparency in the whole process.
According to documents available with The Express Tribune, the government of Pakistan has already accepted the offer of Russian government to award multi-billion rupees contract to Russian state-owned firm VO Tyazhpromexport.
Ministry of Production just wants the consent of CDWP and Ecnec to finalise the deal, sources added.
President Zardari’s during his visit to Russia on May 11 to 13 held a meeting with the Russian state-owned firm in connection with the expansion of Pakistan Steel through technical assistance and concessionary financing by the Russian Federation.
The augmented profit from the expansion programme would also be helpful in meeting expenses for another expansion up to three million tons per year.
Pakistan Steel Mills low production and low capacity utilisation is resulting in the low sales and mounting losses, says the document. No investment had been made to catch up maintenance and mandatory repairs, which eventually resulted in the deterioration of the machinery and equipment. The surplus manpower, mounting liabilities, poor discipline and lack of accountability culture have added to the already depressed situation, according to documents.
Document further reveals that Pakistan Steel set up with the techno-economic assistance of the then Soviet Union has robust mechanical equipment but weak control system, which has resulted in inefficiencies and inaccuracies.
Keeping in view that the current demand of steel in the country is around 5.5 to 6 million tons per year, the present government has accorded priority to the expansion of Pakistan Steel Mills from its existing capacity of 1.1 million tons per year to 1.5 million tons, documents add.
Published in The Express Tribune, October 20th, 2011.
COMMENTS (7)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
1713853507-0/MalalaHilary-(2)1713853507-0-270x192.webp)
Does the problem lie in the expansion or elsewhere? At PSM, it is for the officers either to do the job or to save the job. Each of its senior office is under some kind of inquiry. PEPRA over rules the Board of PSM, and following PEPRA in letter and spirit means e.g. explosives ordered in March 2010 are yet to be delivered. Its a commercial organization run like one of the Secretariates or Ministries in Islamabad. Its not a matter of expansion only, at the present capacity, PSM is unable to meet its raw material requirement then how can it cope once the capacity is increased. First, let us see where the problem lies, is it in the expansion or in over staffing, mismanagement, lack of Iron Ore supplies, the labor union dominating the management, the management too tardy in getting the General Sales Taxes waived or minimized on the local Iron Ore so that the ore instead of being exported, is supplied to the PSM, the systems revamped for the sampling and analysis of the Local Iron Ore, the minimum supply quantity now at 500 m.t. brought down to 200 m.t. providing support and opportunities to companies in the private sector working towards finding ways and means to enhance the supply of local raw material etc. etc. Any investment in terms of expansion or whatever, will mean nothing if these aspects are not looked into and rectified. Expansion would mean a few more trips for the officers from PSM and the Ministry to Russia perhaps supported by a healthy kick backs for some and the situation to remain where it is or can even go from bad to verse as investment in the expansion can further burden PSM without meeting its full need for raw material....GOOD LUCK TO YOU PSM
this is the good news for pakistansteel
@antanu g: Why drag India into this? This is a commercial deal. There is no big/strategic Russia-Pak cooperation.
The Russia of today is not the socialist powerhouse that Soviets were 2 decades ago. It has lost its technological edge and its economy is no longer driven by industry - it is driven by oil, gas and natural resources. With the oligarchs in charge, there is no longer respect for a contract.
And to your point, India is the India of today, because of India not because of Russia. During the heyday of India's "partnership" with Soviets, the economy grew at a rate of 3-4% pa. India's growth accelerated only after it stopped relying on the Soviets and dismantled Soviet style planning.
What matters is that slowly all our main national assets are controlled by foreign companies.. the chinese already control 60% of everything (infrastructure, military, power, ports, roads, ships, telecom... long list) with local industries being completely wiped out and major job loss in small and medium sectors. Rest controlled by americans and europe, and now enters the russians. Given the failed state of economy and HUGE debt, In next 10 years, entire country seems to be sold out to foreign corporates.
Sounds like a good outcome. PSM needs to be urgently rehabilitated both structurally and financially. Russians are the right people since they built it and have the technology to expand it for Pakistan. Let's get the action rolling.
The Russia of today is a whole different beast than the planned Soviet style industry builders of earlier. Good luck getting the Russians to keep up their end of the contract - if they do, it will be a first in recent memory. The norm with today's Russia is more like 3 price renegotiations, followed by "changes in specifications" and finally littany of complaints about how the local environment is not conducive to execution on time.