Aiming for privatisation: Govt wants Steel Mills review petition returned

Apex court had nullified privatisation of mills in 2006; review petition still pending.

ISLAMABAD: In order to clear the path for privatising Pakistan Steel Mills Corporation (PSMC), the federal government wants the Supreme Court to return the review petition in the case involving the mills, The Express Tribune has learnt.

A document sent by the Ministry of Privatisation to the National Assembly Standing Committee on Privatisation seeks taking away its status as a public institution on account of its massive losses. The organisation is currently incurring a loss of Rs 1.6 billion per month while its operational and financial condition continues to deteriorate after it hit a new low of functioning at 15% of its capacity, the document reveals.



“…Despite the aforementioned status of the PSMC, various international private or state-owned steel related corporations have expressed their interest [in the privatisation] and inquired about the PSMC…,” the document states.

The mills accumulated losses have crossed the mark of Rs56 billion and its outstanding liabilities have shot up to Rs67 billion, it claims. On August 8, 2006, the Supreme Court had nullified the privatisation of the Pakistan Steel Mills in a suo moto case.

Dissatisfied with the development, the federal government had filed a review petition against the judgment in June 2006. The review petition was admitted for hearing; however, it has been pending adjudication since then.

Observers say that the Supreme Court’s decision against the PSMC’s privatisation became the main reason for friction between Chief Justice Iftikhar Mohammad Chaudhry and former president General (retd) Pervez Musharraf. To pave the way for the privatisation of the mills, the Ministry of Privatisation has also asked the law ministry to take steps to withdraw the review petition.

The document states that the Privatisation Commission (PC) Board has approved the withdrawal of the review petition pending before the Supreme Court. For this purpose, the board has already solicited the consent of the co-petitioners and the law division, the document adds.

The PC Board also directed that the Supreme Court be apprised of the compelling reasons for its withdrawal, the document adds. “Despite the administrative and financial efforts made under the CCOR [Cabinet Committee on Restructuring] revival of Pakistan Steel Mills is yet far away as PSMC management is finding it extremely difficult to adhere to its proposed business plan(s) primarily due to the insufficient and untimely release of the requisite funds,” it states.

The document claims that the PSMC continued its descent into chaos as it suffered a loss of Rs26.5 billion for the year ending June 30, 2009. The following years—2010 and 2011—the PSMC incurred more losses to the tune of Rs11.5 billion and Rs11.4 billion respectively “and still continues to bleed”.

The PSMC in 2009 requested the federal government for Rs10 billion as capital injection in addition to the provision of bank loans worth Rs10 billion for restoration of its raw material stocks and for maintenance of its production capacity. The brief states that the government did not inject capital but approved a bailout package of Rs 10 billion, comprising Rs 8 billion in loans and Rs 2 billion as running finance through a consortium of banks.

Again in 2009-2010, the PSMC management demanded approximately Rs25 billion whereas the government allowed Rs10.6 billion, which were adjusted against the outstanding Letter of Credits worth Rs5.1 billion, the document states. Thus only Rs5.4 billion were left for the fresh Letter of Credits for the procurement of the raw materials. “…Hence there was no turnaround in the affairs of the PSMC,” the document explains.

Published in The Express Tribune, December 26^th, 2012.