Private sector may get to run Pakistan Steel Mills

Senate recommends outsourcing management to the private sector.

ISLAMABAD: The Senate Standing Committee on Industries and Production Thursday recommended outsourcing of the management of the Pakistan Steel Mills (PSM) through public-private partnership.

Speaking in the committee meeting, Senator Sardar Fateh Muhammad Hassani said the experience of privatisation in the past particularly that of the Karachi Electric Supply Company (KESC) did not produce good results. He said, “It will be better to opt for outsourcing the management through a public-private partnership on the basis of 51% and 49% shareholding ratio.”

The PSM will not become a profit-oriented entity, unless local mining is encouraged, which will provide the core raw material – iron ore – at lower rates, he added. Hassani said that the imported raw material was expensive and major portion of the revenue of the company was spent for procuring ore, squeezing margins.

Moreover, the dual taxation on the raw material also increases the cost, he added. He urged the government to encourage local mining and introduce a single taxation system on raw materials, which will bring down costs by 40%. He informed the Senate that besides domestic factors, international crises in 2002 and 2008 caused losses of Rs50 billion to the PSM.



Senator of Jamiat Ulema-e-Islam-Fazal Haji Ghulam Ali also endorsed handing over the operations of the PSM to the private sector to steer the mill towards profitability.

Pakistan Muslim League – Nawaz Chairman Senator Raja Zafarul Haq said dual taxation was not only impeding the growth of the steel mill, but all the industries situated across Pakistan.

PSM Chief Executive Officer Major General (retd) Muhammad Javed told the committee that the condition of the PSM was improving as it repaid Rs10 billion debt during the last three months, of the total Rs14 billion.

A memorandum of understanding had been signed with Russia to enhance the production capacity up to 1.5 billion tons per year, which will also help improve the financial position of the company, he added.

He said only Rs9 billion was needed for restructuring of the company. “Due to the financial crisis of 2008 and steep rise in coal prices, the practice of entering into long-term procurement contracts led to a substantial increase in production costs in 2008-09,” he said. Additionally, the prices of the final product of the company recorded a decrease in August-September 2008 due to lower demand for steel and ample supply.

The committee convened the State Minister for Finance, Secretary Finance and the Federal Board of Revenue (FBR) in its next meeting.

Published in The Express Tribune, February 8^th, 2013.

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