The Russian giant has proposed the establishment of Pakistan Steel Mills Holding (Private) Limited and five subsidiaries. PHOTO: FILE
The Russian firm has claimed that it will turn the steel mill financially viable, enabling it to pay salaries to its employees in a year's time while implementing a revival plan submitted to the Ministry of Industries and Production.
Governments of Pakistan Peoples Party (PPP) and Pakistan Muslim League-Nawaz (PML-N), which had separately been in power from 2008 to 2018, failed to efficiently run PSM as its financial condition deteriorated persistently over the years. Now, the mill has shut down with losses exceeding Rs200 billion.
PSM, which owes Rs19 billion to Sui Southern Gas Company (SSGC) for gas supply, had been operating at average 33% of its capacity during the PML-N's tenure in 2015 when the public gas utility suddenly cut off supply. Since then, the mill has not been running and its losses have continued to mount.
In the revival plan sent to the Ministry of Industries, which shared it with an expert group working on the revival of PSM, Russian state enterprise Tyazhpromexport said it had already offered a loan for a balancing and modernisation programme along with expertise for running the mill.
However, the offer had been ignored and later the company submitted a concept paper for reviving the mill.
Pakistan Steel Mills in further trouble as losses swell to Rs200b
The Russian giant has proposed the establishment of Pakistan Steel Mills Holding (Private) Limited and five subsidiaries including PSM COBP (Private) Limited, PSM Power Plant (Private) Limited, PSM Rolling Mills (Private) Limited, PSM Steel Making (Private) Limited and PSM Iron Making (Private) Limited.
Repair and modernisation work will be undertaken complex-wise. Citing an example, the Russian company said COBP was currently up to date and as such was fully functional. Once it became an independent company, it would carry out operations on its own by selling services, products and byproducts from the plant, it said.
Likewise, the proposed power plant has generation capacity of 165 megawatts, but it needs to be upgraded and modernised, which requires investment. The electricity generated by the plant will be sold to other complexes of the steel mill and K-Electric.
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The funds generated would go to operational expenditures and credit may be provided for upgrading and modernisation of the mill, it proposed.
The Russian company also suggested that an agreement may be inked with the original equipment manufacturers or a government-to-government agreement may be reached under which the plant may be upgraded and credit may be provided against sovereign guarantee with payback period of seven years or any other period.
On the same pattern, the entire mill may be revamped, upgraded and modernised.
Any lending, which may be further required, should be offered to the holding company by the government or otherwise. This, it said, would ring-fence the new company from the old debt, since a new firm would be registered for each complex and department with fresh hiring out of the current workforce.
However, according to the Russian company, since the power plant fits in perfectly with the number of employees, the plant had the potential of coming into profit at the quickest pace.
Published in The Express Tribune, February 9th, 2019.
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