Resuscitating PSM

Another day, another set of proposals on how to turn the Pakistan Steel Mills (PSM) around. A group of experts has now advised the government to convert the PSM into a public-private partnership (PPP) instead of selling it off. The plan would entail first stopping the company from haemorrhaging money, then finding ways to upgrade it.

Adviser to the Prime Minister on Commerce, Industries, and Production Abdul Razak Dawood had recently told the media that the government cannot run businesses and highlighted the PSM as an example. But the problems facing the Mills are manifold, not just bad management. Some of them are borderline hilarious. The blast furnace — which is used to turn iron ore into molten iron — has apparently been out of order for more than three years after a sudden cut in gas supply had caused sludge to turn into a 13-foot-high rock of iron. On that note, although there are now proposals to build a new modern blast furnace, the ability to melt down iron ore is not going to turn around the failed mills, nor will workarounds like outsourcing some raw material.

The expert group claims that the PSM could be refurbished and the condition of its plant was not bad enough for it to be scrapped, but that line is reminiscent of the one perennially used when referring to Pakistan International Airlines — another bloated, nepotism-infested, state-owned enterprise that has not been profitable since before most living Pakistanis had even been born.

According to some reports, the PSM lost almost Rs13 billion between August and December 2018, or over Rs2 billion per month. Asad Umer himself said in December that the losses were ‘only’ Rs1.4 billion per month. The PSM is bleeding the exchequer at a time when development budgets are being cut. Money that could be used for health and education or even food subsidies to help the poor is being spent on a vanity project. When it comes to business, the state has always had a tainted touch. From banks to industry to education, the state has destroyed the industries it had nationalised, and failed to clear the low bar it firmly set in industries it operates. The PSM is no different.

Published in The Express Tribune, April 11^th, 2019.

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