Officials said the PSM was currently running at 50% production capacity and was committed to attain 77% – the breakeven point – during April 2015. PHOTO: FILE
The government has shelved its years-old plan of trying to expand the Pakistan Steel Mills (PSM) and will now attempt to privatise the sick unit, said a senior official.
Pakistan and Russia had signed a memorandum of understanding (MoU) during the Pakistan Peoples Party government in which the latter had assured an assistance amount in the range of $300 million to $500 million. The money would have gone in expanding the steel mill that had been operating well below the optimum level.
However, recently with the help of bail-out packages, the PSM has improved its production capacity, albeit still below standards, and the government now wants to privatise the unit.
“The government has scrapped a plan of expanding the steel mills as it wants to privatise it now,” a senior government official said.
Russian firm Tyazhpromexport had helped Pakistan establish the PSM with the authorities calling it a symbol of blossoming Pakistan-Russia bilateral relations in the early 1970s. However, the PSM has failed to live up to its true potential, often being at the crossroads of various governments’ nationalisation and privatisation plans.
During PPP’s latest tenure
The previous government had accepted Russia’s offer and the multibillion-rupee contract was to be awarded to Russian state-owned firm VO Tyazhpromexport.
Completion of the expansion project was aimed at significant turnaround of the PSM by increasing its market share and improving its financial condition. The augmented profitability and cash flow, as a result of the implementation of the expansion programme, was believed to be helpful in meeting expenses for a further full-fledged expansion up to 3 million tons per year.
However, there have been no expansion projects yet. Instead, the PSM is operating through sporadic bail-outs by the government that help the management meet salary and daily expenses.
With the government down the privatisation road already, talks of selling off the PSM are also under way. A delay in increasing its production level to 77% of capacity, however, is causing a delay in its privatisation.
Earlier, auditors had conveyed to the government that they were not in a position to give any opinion on the financial muscle of the corporation due to its poor performance.
Officials said the PSM was currently running at 50% production capacity and was committed to attain 77% – the breakeven point – during April 2015.
The Ministry of Industries, in a meeting of the Economic Coordination Committee (ECC) held on April 25, 2014, had informed that in the current situation, the possibility of finding a strategic partner for PSM looked remote. It had proposed that the government agree to implement a six-month restructuring plan until a financial adviser was appointed for the public issue.
Meanwhile, the Privatisation Commission held a meeting last Tuesday to appoint the financial adviser. According to officials, Pak China Investment Company (PCIC) was to be appointed the financial adviser by the PC.
Published in The Express Tribune, April 16th, 2015.
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