Moving on: Govt sets deadline for Steel Mills sell-off

Policy statement reveals plans to sell 26% shares within a year.

ISLAMABAD:

In a last-ditch effort to keep the ailing state-owned enterprise on its feet, the government disclosed plans to sell 26 per cent shares of Pakistan Steel Mills (PSM) to a strategic partner within a year.

According to a policy statement submitted to parliament, the government plans to hire a financial adviser by March 2014 to prepare a comprehensive restructuring plan. “The plan also includes finding potential strategic private sector participation through divesting 26 per cent shares to strategic investors by end December 2014,”the statement reveals.

For the first time, the government, has drawn up an actual deadline to sell PSM – one of the 32 state-owned enterprises, marred by claims of rampant corruption, inefficiency and over-employment.

Desperate to cut losses, the government seems to be following the same restructuring plan for PSM that it finalised for the struggling national flag carrier - Pakistan International Airlines (PIA).

The fiscal policy statement, submitted by debt policy coordination office of the finance ministry aims to analyse the key economic indicators and whether the policies are aligned with sound fiscal and debt management.



The fiscal policy statement shows that the PSM’s average capacity utilisation was consistently on a downward spiral since 2007-08 and plunged to 7 per cent in December 2013. The statement further reveals that PSM incurred Rs29.5 billion losses during the last fiscal year alone and Its accumulated losses as of June 2013 mounted to Rs92.7 billion and Rs102 billion.

In addition to the government’s restructuring bid, the Board of PSM has also identified a number of options for PSM - which mainly include attempts to revive it, keeping PSM operational and privatising within 12 months, according to the statement.

Commenting on the issue, the head of the Privatisation Commission Mohammad Zubair said, “There cannot be many options as the only option is to restructure and privatise the PSM.”

On Monday, the privatisation chief finalised a plan for restructuring the financially troubled Steel Mills after completing the consultation process.

According to Zubair’s plan, that awaits an official nod, PSM will be first restructured and then privatised, a process that will take one and half year. The privatisation plan largely hinges on success of restructuring of the PSM, Zubair added.

The privatisation tsar said restructuring will require capital injection, opening of letter of credits for procurements to enhance capacity and the cooperation of the PSM management and the employees, also.

The government has tentatively scheduled a meeting of the Board of the PC for next week to seek its nod for privatizing the PSM, said Zubair. However, he said the final decision to take the PSM to the PC Board will be taken shortly.

While commenting on Pakistan Railways, which has accumulated heavy losses, the policy statement added that the Railways has recently shown improvement on key performance indicators.

Published in The Express Tribune, February 4^th, 2014.