Still the majority shareholder: ECC finally lays out a plan for steel mills

Decides to sell a minority stake with management control and inject Rs3 billion.

ISLAMABAD:

The government has abandoned the plan to fully privatise or close the country’s largest industrial unit and has decided to sell a minority stake of Pakistan Steel Mills (PSM) to a strategic partner along with management control, while also approving about three-billion-rupee fresh bailout package for the entity.

On Saturday, the Economic Coordination Committee decided that the PSM will remain a public sector enterprise, according to an official announcement. The PSM management had floated three proposals: privatise the country’s largest industrial unit, shut it down or give over Rs28 billion to enhance its productivity level.

The ECC decided that the government will search for a strategic partner with a minority stake who will be given the option to manage Steel Mills’ operations. The government’s decision came following Pakistan Peoples Party’s threat to block the national highway connecting Sindh with the rest of the country, if the government decided to privatise PSM.

A privatisation board, housed at the prime minister office, has listed PSM among the 71 entities that the government wished to privatise or restructure. Privatisation of 65 entities is also part of the International Monetary Fund (IMF) programme and the government is bound to announce a comprehensive plan for the state-owned entities in the next three months.

Other than finding a strategic partner, there is no other option to stop the bleeding in the PSM, said Board of Investment Chairman Mohammad Zubair, who was also a member of the privatisation board. Replying to a question, he said the decision on retaining employees will be of the strategic partner and the government’s responsibility will only be to ensure that fair treatment is given to every employee.

Zubair said in the last five years, about 5,000 more people were hired and the industrial unit was running at below 20% of the capacity. The total workforce of the PSM was close to 17,000 including 1,900 contractual employees.

Zubair said some international companies having knowledge of the steel business have recently shown interest in the PSM.

The ECC decided to approve a three-month bailout package of Rs2.9 billion, out of which Rs1.5 billion will be released in September, Rs700 million in October and another Rs700 million in November for paying the salaries of the employees.

For the last five years, the PSM management did not deposit the gratuity of the employees and the money was used to pay for losses, which was a criminal offence, said the BOI chairman.

Green light to sugar export

The ECC allowed export of 500,000 tons of sugar, of which 250,000 tons is expected to be harvested next month and the remaining in November on expectations of bumper sugarcane crop this year. The ECC took this decision subject to the condition that the sugar industry will clear the outstanding dues towards growers – an excuse also given early this year when the previous government gave permission to export 400,000 tons of sugar. However, the millers did not fully clear the dues.

The ECC also linked the export with early start of crushing of sugarcane in Sindh by November 1 and in Punjab from November 15. The ECC decided that inland subsidy for exporting the commodity will be reduced from Rs1.75 to Rs1 per kilogramme. The decision is likely to earn a foreign exchange of $480 million, it added.

While expressing satisfaction over the stock position of sugar in the country which is at present 2.3 million tons, the ECC directed the Trading Corporation of Pakistan to also purchase 100,000 tons to maintain strategic reserves. Similarly, the ECC was told that presently the wheat stock was at 7.1 million tons compared to 6.8 million tons in the corresponding period of last year.

They were also informed that Pakistan’s oil reserves stood at 85 days, compared to 29 days in the corresponding period of last year. This improvement the ECC noted had come about as a result of clearance of circular debt by the government.

Foreign currency position

State Bank of Pakistan Governor Yaseen Anwar informed the ECC that the country has received the first instalment of $550 million from the IMF. With the first IMF tranche out of the approved $6.7 billion package, currency reserves again increased to $10.4 billion, said Anwar.

 

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

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