Iranian, Chinese companies eye steel mill acquisition

New investors will be given hiring and firing powers

ISLAMABAD: The government is again starting the process for the sale of financially sick Pakistan Steel Mills (PSM) whose losses have piled up to Rs167 billion, says a top government official.

The Cabinet Committee on Privatisation (CCOP) will take up the matter of PSM sell-off in its meeting on January 18 as two investors are willing to acquire the largest industrial unit of Pakistan on long-term lease.

Privatisation Commission Chairman Mohammad Zubair stated this in a meeting of the National Assembly Standing Committee on Industries and Production, presided over by Pakistan Tehreek-e-Insaf MNA Asad Umar on Wednesday.



Accumulated losses of PSM up to September 30, 2016 stood at Rs167.315 billion and its liabilities reached Rs177.778 billion. The current government had inherited PSM with accumulated liability of approximately Rs120 billion and almost zero capacity utilisation in mid-2013.

PSM had been given approximately Rs50 billion in bailout packages between 2008 and 2013. However, the mill could not stand on its feet and constantly defaulted on payments to Sui Southern Gas Company for gas supplies. It owes SSGC about Rs41 billion.

“We have prepared a lease-based transaction structure for PSM. One potential investor is an Iranian steel company and its team recently visited Pakistan to assess the mill’s worth,” Zubair said. “The second potential investor is a Chinese company along with a local concern.”

The buyer will be given hiring and firing powers.

Zubair revealed that the new sell-off structure would be reviewed by the Privatisation Commission Board on January 16, after which it would be put before the CCOP.

If the committee gives the go-ahead, then the Privatisation Commission will invite Expressions of Interest (EoIs) and the process will take 45 days.

According to Zubair, the government will face a further financial loss of about Rs10 billion till the privatisation is completed.

Given the poor state of the mill, the present government approved a bailout package amounting to Rs18.5 billion in April 2014 in a bid to privatise PSM in operational condition. However, the mill has failed to achieve the desired capacity targets.



An official statement said the standing committee expressed displeasure over the daily losses suffered by the steel mill and recommended that its issues should be resolved on a priority basis - either it be privatised or sold.

Published in The Express Tribune, January 5^th, 2017.

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