China appeared to be out of the race for getting the contract for the revival of Pakistan Steel Mills (PSM) as Pakistan and Russia signed a protocol on the matter on Friday aimed at restarting and expanding steel production in the country and marking a new chapter in Pak-Russian cooperation.
The protocol to restore and modernise the PSM in Karachi was signed by Industries Secretary Saif Anjum and General Director of Industrial Engineering LLC Vadim Velichko at the Pakistan Embassy in Moscow, according to a statement issued here.
The signing ceremony was witnessed by Special Assistant to Prime Minister Haroon Akhtar Khan, Pakistan's Ambassador to the Russian Federation Muhammad Khalid Jamali and others. Khan is currently on a visit to Russia with a mission to seek assistance for the revival of the PSM.
"Reviving the PSM with Russia's support reflects our shared history and commitment to a stronger industrial future," Khan said, according to the statement. It said that the PSM was originally built with assistance of former Soviet Union in 1971, and had remained a lasting symbol of Pakistan-Russia ties.
The PSM had started crumbling in 2008. A major reason behind the mill's failure was thousands of new appointments, global recession as well as other factors. The PSM recorded a loss of Rs16.9 billion in 2008-09, which jumped to Rs118.7 billion in five years.
Successive governments of the Pakistan Peoples Party (PPP) and the Pakistan Muslim League-Nawaz (PML-N), which had been in power from 2008 to 2018, had failed to efficiently run this industrial behemoth, whose financial woes continued due to all time high losses.
Later, the Pakistan Tehreek-e-Insaf (PTI) government launched an initiative to revive it, triggering a race between China and Russia to get the contract. Initially, the PTI government was tilted towards China and had started negotiations with a Chinese firm but the talks could not materialise.
The Russians, on the other hand, had claimed that since the project had been built by them with the Russian technology; therefore, they were in the best place to find solution to the problems of the sick unit and make it up and running again.
The PSM had cumulative profit of Rs9.54 billion up to financial year 2007-08 during the tenure of the then president Pervez Musharraf. Over the next 10 years, its losses continued to swell, reaching Rs200 billion at the end of its tenure on May 31, 2018.
Liquidity crunch in the country, import of steel products at lower prices and closure of production units because of gas outages were among the major drawbacks the PSM faced. A flood of cheap steel imports from China also created hurdles in the way of smooth functioning of the PSM.
In a meeting of the Economic Coordination Committee (ECC) on March 19, 2016, the Industries Ministry officials held the view that the Pakistan-China free-trade agreement (FTA) - in force since 2007 - was responsible for the PSM's financial collapse.
During the PML-N government tenure, a Rs18.5-billion bailout was approved and the industries ministry was tasked with increasing the PSM's capacity utilisation to 77% - the break-even point - by January 2015 so that it could be put up for sale.
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