Business

The white elephant that is the PSM

The real reason for the PSM’s plight is its management’s incompetence, and this is what the government should be...

Editorial August 11, 2015

At no point did he consider the issue of the PSM clearing outstanding SSGC bills or the extremely poor performance of its management over the years.. PHOTO: AFP

The Pakistan Steel Mills (PSM) is seeking yet another bailout package from the federal government in a bid to resume operations at the closed plant. It wants an amount of Rs4.2 billion to open letters of credit and make four-month salary payments. Normally, the news of the steel mill looking for money would pass without the raise of an eyebrow, but it is necessary to delve deeper to examine this particular development. The PSM is crying foul over reduction in the pressure of the gas it is supplied by the Sui Southern Gas Company (SSGC) and insists that this is the reason it has been unable to resume work. However, what its management completely avoids to mention is that the SSGC is also looking to clear outstanding bills due on the part of the PSM. Recently, the Sindh chief minister ordered the SSGC to resume gas supply to the PSM, declaring that “any conspiracy towards the steel mill or its workforce would not be tolerated by the PPP”, his concern highlighting the fact that majority of the employees at the PSM are PPP affiliates. However, at no point did he consider the issue of the PSM clearing outstanding SSGC bills or the extremely poor performance of its management over the years.

Using phrases such as “losses, shutdown and collapse”, is a desperate attempt on the part of the PSM management to seek yet another bailout. The entity has great historical and financial significance for Pakistan and had its management done a better job maintaining its complex infrastructure and financial health, it would have even been relatively competitive. In contrast, what we find is the government allocating it Rs5 billion as provision for loans and advances in the 2014-15 budget, which had shot up to Rs13.8 billion by the end of the year. In 2015-16, the government has reserved a provision of Rs3.8 billion for the PSM. That this amount would go up too, remains a foregone conclusion. The real reason for the PSM’s plight is its management’s incompetence, and this is what the government should be looking at when considering the steel mill’s future.

Published in The Express Tribune, August 12^th, 2015.

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COMMENTS (9)

ishrat salim | 9 years ago | Reply @Gullu: Do you agree that it was making money till 2007 end, after which in 2008 when PPP govt came to power it started to go into red, means what ? it can be turned into profitable business venture if there is political will without loot & plunder. Was there no commercial margin during Gen M period, then how PSM was making money ? If the govt cannot bail out any more, why did the SC on political & public pressure stopped it from sell off in 2007 during Gen M period ? who will buy a loosing company ? how much money lost from 2008 to 2015 ? this could have been saved, but due to our SC & political illiterate peoples ego & arrogance against the dictator, they all rather STOPPED sell-off & keep it afloat from 2008 to 2015 through taxes money, is this called patriotic thinking ? bringing it to a stage where people like you are advocating sell-off after loosing billions. If govt cannot run corporation, then why the govt is bailing out PIA every now & then, it should be sold-off too. All govt owned power generation & DISCOS also should be sold-off too.

numbers | 9 years ago | Reply No mention of the fact that PSM became a hiring hall for political members of whichever political party was in power, ending up with a bloated payroll just like PIA! "Political Incompetence" at its best!

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Timorlane | 9 years ago | Reply PSM was churning profits in billions until 2008 when zardari corruption gang took over the country like a plague and over infested PSM with incompetent and corrupt people from interior sindh who looted and destroyed PSM just like they loot and destroy every place they get their hands on

Kanishka | 9 years ago | Reply @ishrat salim: Why fear or manufacture any iron or steel in Pakistan when all-weather, deeper than ocean and higher than Himilaya Iron Brother is here to dump cheap steel produced from the iron ore shipped from Balochistan.

Gullu | 9 years ago | Reply @ishrat salim: Government doesn't have the money to bail it out again and again. You say the government should enact import duties without which PSM cannot compete. If it cannot compete then what good is it? To inflate the price of steel in this country? As it is we have a shortage of affordable housing in this country. High steel prices will only make matters worse. Bottom line is that the government can't profitably do business in a free market and it should stop trying to.

ishrat salim | 9 years ago | Reply It is not a solution to sell it out of course, but we must go into the details of its non-performance as to how & why PSM has come to this stage. 1) before 2008, PSM was in green. It was at this time that it was being sold off, when the whole deal was politicized & ex CJ had to take suo moto notice & cancelled the deal. Since 2008 to 2015, the govt has spend billion plus just to keep afloat. Was it a wise decision then & now. 2) when the new govt of PPP came in, PSM as per their agenda started to bleed & corruption was at its height, which again forced ex CJ to take suo moto notice after which the PM Jillani Sb removed the Chairman of PSM on charges of corruption, but till today the main corrupt officials & suppliers have not been investigated nor prosecuted, even though SC ordered FIA & NAB to investigate. 3) PPP govt & the present govt has not been able to give a firm policy to safeguard PSM products from imports by unscrupulous importers & the Chinese products which have flooded the market making PSM products un-competitive. PSM products need state protection by levying high import duties, but it is not the case, resulting in piling up of PSM products in billions in stock which has blocked billion rupees. 4) while outstanding against gas is Rs 35 billion against KE electric Rs 50+ billion, it is the duty of the govt to find a common ground & give PSM breathing space, instead complete shut down of gas has put PSM facilities on ventilator. Thousands of employees & their families are dependent on this industry. It is the duty of the govt to honestly give support to this important industry to stand up on its feet, then, of course sell it off to get a good bargain, otherwise, it will end up like HEAVY ELECTRICAL COMPLEX, which was being sold for a mere Rs 250 million, is this fair ? Either the govt must seriously make a choice, sell it off, but compare the amount which was being offered during Gen M period & what the govt receives now.

Parvez | 9 years ago | Reply Why is Pak Steel a white elephant ? ...... because the government / bureaucracy that manages it has run it into the ground due to inept and corrupt practices ...... the sooner it is privatized or shut down the better for the exchequer.

wasim ahmed | 9 years ago | Reply Sell this white elephant if possible.. or shut it down.. and en-roll its employees under Benazir Income support program.. because currently they are getting free money in the name of salary without doing anything.

Gullu | 9 years ago | Reply Will somebody step up and take responsibility? They should shut it down and sell of the land and the machinery if they can.

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