The government of Sindh has linked its acquisition of the financially troubled Pakistan Steel Mills (PSM), which is virtually closed, with the offer of incentives from the federal government, an official says.
The demand of incentives comes in the wake of a letter written by the PSM management to Sindh Finance Minister Syed Murad Ali Shah a couple of weeks ago in which it asked for intent, if any, of the provincial government to take over the mill.
PSM CEO could continue despite expiration of contract
According to the PSM management, the federal government is offering the mill as it is in the current condition in line with a decision of the Economic Coordination Committee (ECC). The centre was not ready to offer any incentives, it said.
As a result, the province appears to have lost interest in the mill, which is a gigantic industrial complex. It replied to the letter that since the federal government was not willing to extend fiscal incentives, it could not push ahead with the planned acquisition.
The earlier offer to the Sindh government for taking over the mill, after the province expressed its desire and opposed privatisation, has remained unanswered despite a passage of several months.
“Due diligence takes just a couple of months, not years. The provincial government should have sent its formal response by now,” commented an official of the Ministry of Industries.
The Sindh government, run by the Pakistan Peoples Party, believes that the centre had deliberately stopped gas supply to the mill. There had been no updates on the mill’s condition, its labour union had gone to the Supreme Court and the federal government was playing games, the province said.
To sell or not to sell? Steel mill privatisation sceptics meet up
On the other hand, it pointed out, Sui Southern Gas Company has filed a case against PSM for the recovery of gas bills.
The Cabinet Committee on Privatisation is likely to meet prior to the 11th quarterly review of Pakistan’s economy by the IMF in which progress in talks with the Sindh government on the fate of PSM would also be discussed along with a proposed future strategy.
Separately, the PSM board of directors will meet on April 28 to approve an “employees’ rationalisation plan” and other issues.
According to the official, the Privatisation Commission (PC) has recommended that PSM employees should be paid salaries every month instead of quarterly payments to deflect criticism over delay. It has requested the government to approve pay arrears and salaries of the employees. It has also asked the PSM management to come up with details of the employees according to the ECC directives.
It has been proposed that essential expenditures on bills amounting to around Rs80-90 million per month should either be paid by the federal government or the mill should be allowed to pay these through the sale of inventory.
PSM conundrum: Govt eyes Rs9.3b bailout without restoring gas supply
PC Chairman Mohammad Zubair, in a letter to newly appointed Industries and Production Secretary Khizar Hayat Gondal, said since PSM operations stood totally closed since June 2015 due to suspension of gas supply, the government was releasing Rs480 million per month for salaries of the employees on humanitarian grounds.
Under the circumstances, the rehiring of contractual employees was totally unjustified, he said.
Zubair advised the secretary that necessary instructions should be passed on to the PSM management for immediately terminating the contracts of all employees rehired after June 2015.
According to officials, the cost reduction plan prepared by the PSM management did not say that employees were being removed but it was an exercise aimed at ascertaining how many employees could be rehired soon after retirement.
Published in The Express Tribune, April 24th, 2016.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.