Cabinet committee: Pakistan Steel revival plan wins green light

Capacity utilisation of mills will be enhanced to 60% by end of 2012-13 from a current level of 20%.

Our Correspondent June 29, 2012


The government has decided to gradually reduce the losses being incurred by Pakistan Steel Mills through enhancing its ability to utilise its production capacity instead of throwing more money in the blast furnace of the mils in shape of cash bailouts.

A profitable entity until 2011, the accumulative losses of the state-run PSM have crossed Rs50 billion during the last four years. The unit is causing a loss of Rs550 million per month to the national exchequer.

“We have to strike a balance between the capacity enhancement to reduce losses and the cost of revival”, said finance minister Dr Abdul Hafeez Shaikh, while talking to The Express Tribune. He said the government was also cognizant of the fact that the capacity enhancement at the earliest would ensure recovery of fixed cost at a faster pace.  A meeting of the Cabinet Committee on Restructuring (CCOR) held with Hafeez Shaikh in the chair decided on Thursday to implement the monthly plan for capacity enhancement of PSM, according to finance ministry.

In the first phase, the capacity utilisation of PSM will be enhanced to 60% by end of new fiscal 2012-13 from a current level of 20%. According to this plan, the complete revival of the PSM will be possible by December 2013 - the month when the PMS’s capacity will be enhanced to 80%.

The committee discussed various recommendations for improvement in the working of PSM and decided to strike a balance between its improving and the financial cost to be borne by the exchequer.

The CCOR decided that Rs5 billion will be released through banking institutions against sovereign guarantees, as part of the earlier bailout package. The government will also facilitate payments to Sui Southern Gas Company to clear Rs1 billion outstanding dues within a year to avert disconnection of gas for non-payment.

“The government wanted to revive the PSM at the earliest but there were financial constraints, affecting the implementation plans,” said Mehreen Razaque Bhutto, member PSM Board of Directors.

The PSM warned the government that in case of inaction, for two more months, the capacity will dip to 13%, causing closure of the PSM, an official who attended the meeting said. The government has recently appointed a retired major general, Muhammad Javed, as new chief executive of the PSM and it did not want to blindly trust him, thus, adopting a cautious approach to rehabilitate the sinking giant, according to the official.

According to finance ministry, the PSM management has been asked to work out cash flow requirements for enhancing the capacity to 60% in the initial phase.

Published in The Express Tribune, June 29th, 2012.


Riaz Haq | 9 years ago | Reply

The crux of the issue for the bloated public sector units like PIA, Pakistan Steel Mills and Pakistan Railways is the reprehensible system of political patronage which puts the wrong people in charge of them. The sooner PIA, PR, PSM and other PSUs become privatized, the easier it will be to revive them for better service and improved profitability. It will turn them into a source of much needed revenue for the public treasury, just as the denationalization of banks did in the last decade.

mpq357 | 9 years ago | Reply

@vigilant: Agreed. 1) Privatize everything (except education and health) 2) Improve and refine tax collecting system The country will improve. Pakistan is a country where the people (rich class) is damn rich and the government poor. By privatizing it, a healthy competition is started and situation will improve.

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