Pakistan Steel: Cabinet to decide fate of 5,000 employees
Cabinet will deliberate laying off 30% of PSM workforce as part of restructuring of the company.
ISLAMABAD:
The cabinet will today (Wednesday) deliberate over laying off up to 5,000 employees of Pakistan Steel Mills (PSM) as part of the restructuring of the loss-making entity. This will be the first litmus test of the government after promising the opposition to reform bleeding public sector entities.
The present strength of the Pakistan Steel employees is 17,000 and the proposed lay-off accounts for almost 30 per cent of the total workforce. Prime Minister Syed Yousaf Raza Gilani will chair the meeting with probably one of the most sensitive political decisions on the table.
This will also determine whether the reforms agenda has been abandoned at a time when the government could not stand by its decision of increasing oil prices in the country. After increasing prices of petroleum products by up to nine per cent, the government reversed the hike under immense political pressure.
The proposal has jointly been tabled by the cabinet’s committee on restructuring public sector enterprises and the PSM management. The committee, headed by Finance Minister Dr Abdul Hafeez Shaikh, has proposed immediately laying off 3,000 employees.
However, sources say a heated debate is likely on whether to sack the employees hired by previous managements on nepotism or offer them voluntary retirement. The PSM management proposes to offer voluntary handshake and is seeking Rs6 billion for the purpose.
According to the proposal, the remaining 2,000 employees will be laid off in the medium term. The PSM management is of the view that 3,000 layoffs will help save an annual Rs230 million on account of salaries.
The PML-N has given the ruling party a 45-day deadline to implement a 10-point agenda, with a focus on administrative and economic reforms. Restructuring of eight public sector enterprises is one of the items on the list. These entities are the source of combined annual losses in the vicinity of Rs250 billion – two times the amount of this year’s revised federal development budget.
The PSM, once a profitable entity, has allegedly succumbed to political nepotism. Cumulative losses of the entity have reached Rs38 billion in just two years. In 2008-09, it suffered a loss of Rs26 billion, while another Rs11.5 billion were lost in 2009-10.
Sources say the government will also announce a new chief executive officer and board of directors for PSM before the weekend. The names are being finalised by the prime minister in consultation with the finance minister.
According to an official handout, PSM has also asked for abolition of the inter-ministerial committee for procurement of raw material and converting Pakistan Steel into an autonomous body with no interference. “The entity should be run in fair manner and there should not be any political interference,” sources quoted acting CEO PSM Imtiaz Ahmad Lodhi as saying.
On Tuesday, Lodhi gave a briefing to the finance minister on the restructuring plan. During the presentation, PSM also requested for zero sales tax on all its proceeds, along with the withdrawal of all concessionary special regulatory orders as import misuse was hurting PSM sales.
The management also proposed an increase in tariffs of its products. The cabinet will also decide on extending over Rs7 billion in guarantees to the PSM for obtaining loans from a consortium of banks.
The cabinet will also be briefed on the restructuring plan of Pakistan Electric Power Company (Pepco) and Pakistan Railways. It has been asked to take a firm decision whether to carry out power sector reforms or not. The government’s indecision is causing Rs20 billion per month losses to the national kitty.
Pepco also gave a presentation to the finance minister ahead of the cabinet meeting. The company’s management said the delay in payment from the provinces was leading to financial losses. It also proposed measures for the improvement of financial sustainability and efficient management, which include the installation of smart meters and metering tree and assistance to each power sector company.
Published in The Express Tribune, January 12th, 2011.
The cabinet will today (Wednesday) deliberate over laying off up to 5,000 employees of Pakistan Steel Mills (PSM) as part of the restructuring of the loss-making entity. This will be the first litmus test of the government after promising the opposition to reform bleeding public sector entities.
The present strength of the Pakistan Steel employees is 17,000 and the proposed lay-off accounts for almost 30 per cent of the total workforce. Prime Minister Syed Yousaf Raza Gilani will chair the meeting with probably one of the most sensitive political decisions on the table.
This will also determine whether the reforms agenda has been abandoned at a time when the government could not stand by its decision of increasing oil prices in the country. After increasing prices of petroleum products by up to nine per cent, the government reversed the hike under immense political pressure.
The proposal has jointly been tabled by the cabinet’s committee on restructuring public sector enterprises and the PSM management. The committee, headed by Finance Minister Dr Abdul Hafeez Shaikh, has proposed immediately laying off 3,000 employees.
However, sources say a heated debate is likely on whether to sack the employees hired by previous managements on nepotism or offer them voluntary retirement. The PSM management proposes to offer voluntary handshake and is seeking Rs6 billion for the purpose.
According to the proposal, the remaining 2,000 employees will be laid off in the medium term. The PSM management is of the view that 3,000 layoffs will help save an annual Rs230 million on account of salaries.
The PML-N has given the ruling party a 45-day deadline to implement a 10-point agenda, with a focus on administrative and economic reforms. Restructuring of eight public sector enterprises is one of the items on the list. These entities are the source of combined annual losses in the vicinity of Rs250 billion – two times the amount of this year’s revised federal development budget.
The PSM, once a profitable entity, has allegedly succumbed to political nepotism. Cumulative losses of the entity have reached Rs38 billion in just two years. In 2008-09, it suffered a loss of Rs26 billion, while another Rs11.5 billion were lost in 2009-10.
Sources say the government will also announce a new chief executive officer and board of directors for PSM before the weekend. The names are being finalised by the prime minister in consultation with the finance minister.
According to an official handout, PSM has also asked for abolition of the inter-ministerial committee for procurement of raw material and converting Pakistan Steel into an autonomous body with no interference. “The entity should be run in fair manner and there should not be any political interference,” sources quoted acting CEO PSM Imtiaz Ahmad Lodhi as saying.
On Tuesday, Lodhi gave a briefing to the finance minister on the restructuring plan. During the presentation, PSM also requested for zero sales tax on all its proceeds, along with the withdrawal of all concessionary special regulatory orders as import misuse was hurting PSM sales.
The management also proposed an increase in tariffs of its products. The cabinet will also decide on extending over Rs7 billion in guarantees to the PSM for obtaining loans from a consortium of banks.
The cabinet will also be briefed on the restructuring plan of Pakistan Electric Power Company (Pepco) and Pakistan Railways. It has been asked to take a firm decision whether to carry out power sector reforms or not. The government’s indecision is causing Rs20 billion per month losses to the national kitty.
Pepco also gave a presentation to the finance minister ahead of the cabinet meeting. The company’s management said the delay in payment from the provinces was leading to financial losses. It also proposed measures for the improvement of financial sustainability and efficient management, which include the installation of smart meters and metering tree and assistance to each power sector company.
Published in The Express Tribune, January 12th, 2011.