The critics of privatisation refer to job losses as though the excess workers at state-owned companies like the PSM will be thrown onto the streets penniless. PHOTO: FILE
Even by the miserable standards of state-owned companies in the country, the Pakistan Steel Mills (PSM) is a badly run industrial giant that operates far below its potential. Yet, it seems that the PSM appears ready to outdo itself in plunging through the depths of financial destitution: the mill is currently running at three per cent capacity, the worst number since 1982. The urgency of resolving the PSM’s fate could not be more serious than it is now.
The cost of a badly managed PSM is far more than simply the cost of having to bail it out every year, though that amount in itself is considerable. Over the past four years, the government has spent Rs40 billion injecting capital into the moribund company, only to see that money goes to waste. No, the real damage caused by the PSM’s dysfunction is that it pushes up the cost of steel production in Pakistan by forcing downstream industrial companies to import steel from more advanced economies.
More expensive steel has several negative consequences for the economy. It is partially the reason why cars in Pakistan are expensive to produce. The lack of action on the PSM, in short, results in a lack of growth elsewhere in the economy.
In the past, we have supported a well-crafted privatisation plan and we remain partial to that idea even now. The critics of privatisation refer to job losses as though the excess workers at state-owned companies like the PSM will be thrown onto the streets penniless. Nothing could be further from the truth. They receive generous severance packages, equal to several months’ or even years’ salaries. And the cutting of jobs at the steel mill will result in the addition of jobs at carmakers as well as a whole host of other industries that will be rendered more competitive through cheaper steel.
In short, it is time for the government to stop dithering and make the decision to let go of the PSM. The economy will be better off in the long run.
Published in The Express Tribune, November 13th, 2013.
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It is time to privatize PSM and give management control to the investors, A mechanism like PIA privatization can be adapted. Instead of wasting money on this big elephant, government should focus on adding energy to national grid and build infrastructure to support economic growth.
Once we have energy availability and proper infrastructure, we can attract more foreign investment to the country. But until then government should get rid of loss making institutes and try to build up basic infrastructure that can support industries to run.
The photo is unbelievable. Why are the workers not wearing fire resistant safety gear ? If PS can spend billions on god knows what, why can't they not provide proper equipment to the workers ?
"In short, it is time for the government to stop dithering and make the decision to let go of the PSM."
This is impossible to do:
a) No one will buy it unless the govt. takes on all the liabilities.
b) Even if they decide to sell it for a song the courts, NAB and other government ministries won't let it happen.
Worse part is the greed. Take the case of PIA. PIA is a white elephant too but people are saying that if the govt. sells 26% of that it will only get $70 million so it shouldn't do it. That is the attitude. These same people will cry "sell! sell!" when PIA is in even worse state a few years from now.
Pakistan must revive PSM. It is serious and major matter. Steel and automobile industries are keys to economic development of a nation. For manufaturing automobiles, you need steel. More automobiles need more roads. Road constrution needs cement, steel, construction machinery, transportaion capacity and generates masive employment. India's economy tok off with 14,000km Golden Quadrilateral. Automobiles in use create a complete industry and empoyment cycle. You can not achieve all this with imported steel.