Pakistan Steel Mills: Ten companies interested in expansion

PSM looking to increase capacity from 1.1m tons to 1.5m tons per annum.

KARACHI: Pakistan Steel Mills has received expressions of interest from 10 companies including Chinese and Russian firms to boost production from its present 1.1 million tons per annum to 1.5 million tons.

“After appointing an international consultant for evaluating the expressions of interest, the process of awarding this contract to a foreign company will be completed within the next three months,” said Imtiaz Ahmed Khan Lodhi, the Chief Executive Officer (CEO) of the Pakistan Steel Mills (PSM).

In this regard, PSM’s management has already given a detailed presentation to the federal ministry for industries and production and the Planning Commission, he said in an interview on Thursday.

According to Lodhi, after starting work on the first phase of expansion, PSM will initiate the second phase named the Green Field Project to double its production capacity to three million tons per year.

He said that PSM has succeeded in restoring the confidence of foreign suppliers of raw materials (iron ore and coal) with import bills amounting to Rs800 million. PSM, he said, has also been approached by private firms registered in Brazil, Indonesia and other countries for supply of raw material. The mill has also devised a new price fixation system with full transparency to ensure better profit margins.

“Next month we will be breaking even. By the end of June 2011, Pakistan Steel will have a small net profit on its accounts,” said Lodhi.

PSM has also returned all its loans and is utilising its own resources to generate funds. It has made its procedures and policies very transparent, especially those of procurement to check possible corruption and third-party certification has also been introduced, he said.

By re-commissioning its battery coke oven-I in February 2011, production will rise to 1.1 million tons per year. PSM, at present, is operating at 50 per cent of its full capacity.

PSM has been catering to up to 20 per cent of total steel demand in the country. For increasing its share in the market, PSM has started diversifying its products, said Lodhi.

Lodhi added that Pakistan Steel has some issues to resolve with the Federal Board of Revenue (FBR) to save it from recurring losses. He said that private steel companies and importers abuse the facility of duty and tax remission on exports granted by the FBR.

Under this facility, the imported steel is meant to be re-exported after value-addition. However, instead of value-addition, these importers sell their stocks in the local market at a comparatively low price. This creates a tough situation for Pakistan Steel which is selling its products and paying 17 per cent sales tax, he added.

Similarly, he said that forged export transactions using the name of Afghanistan transit trade seriously harms PSM. He fully supported the reformed general sales tax suggesting that it will stop the misuse of various tax concessions and facilities.

Published in The Express Tribune, December 10^th, 2010.