No one interested in buying the Pakistan Steel Mills, senate told

ISLAMABAD – Pakistan Steel Mills (PSM), once the pride of the nation, is grappling with an uncertain future as it continues to bleed the national exchequer. Despite being the largest industrial unit in Pakistan during its operational days, no buyers have expressed interest in acquiring PSM, according to the Senate Standing Committee on Industries and Production.

The Privatisation Commission secretary, in light of this disheartening situation, has proposed removing PSM from the list of state-owned enterprises earmarked for privatization. The industrial giant was shut down in 2015 but remains a financial burden, with outstanding dues of Rs 110 billion owed to the government, with an interest payment of Rs 18 billion. Additionally, the annual expenditure on salaries and pensions at PSM stands at Rs 2.5 billion, which PSM is unable to generate.

The financial woes have accumulated, with the Chief Financial Officer (CFO) Arif Shaikh revealing that PSM’s losses have now reached a staggering Rs 206 billion. Theft continues to plague the defunct unit, despite the deployment of 500 security personnel, including Rangers. In the past year alone, scrap worth Rs 12.8 million was stolen.

Plans for the future involve developing an Export Promotion Zone (EPZ) at PSM, with the revival process estimated to take up to six months. However, considerable investment is required to restore the plant to its former glory, with $580 million needed annually to maintain the existing capacity of 1.1 million tonnes, and $1.4 billion required to increase production to 3 million tonnes.

Senator Fida Muhammad walked out of the meeting in protest over a fragmented briefing, highlighting concerns about the lack of accountability and action regarding the privatization of PSM.

This grim situation comes at a time when Pakistan is implementing a $3 billion bailout package from the International Monetary Fund (IMF), aimed at rescuing the country from a sovereign debt default. State-owned enterprises (SOEs) with substantial losses are at the center of this financial crisis. As of 2020, accumulated losses for SOEs stood at Rs 500 billion ($1.74 billion).

The caretaker government is now racing against time to meet IMF conditions as an IMF team is set to visit Pakistan on November 2 for the first of two reviews of the current agreement and privatization remains a top priority in these negotiations.

The meeting of the Senate Standing Committee on Industries and Production revealed the staggering financial burden posed by PSM. An annual expenditure of Rs. 30 billion is incurred on maintaining the closed unit. PSM had borrowed Rs. 110 billion from the government, resulting in an annual interest charge of Rs. 18 billion. Additionally, annual salary and utility charges amounted to Rs. 2.5 billion and Rs. 5 billion, respectively.

The committee also expressed concerns about the abandonment of PSM equipment for several years and the prevalence of theft. Several incidents of theft, including the disappearance of copper worth Rs. 4.7 million, were highlighted.

As per the committee, despite the grim situation, there seems to be a lack of responsibility attributed to security personnel in these theft incidents, prompting further questions about the effectiveness of the deployed 500 security personnel.

The meeting concluded with a discussion on rising sugar prices, driven by smog and court orders. The Federal Board of Revenue’s track and trace system was commended for its real-time monitoring of sugar stocks. The Punjab government was also commended for working on legislation to regulate sugar prices.

The future of Pakistan Steel Mills remains uncertain, and its privatization struggles mirror the challenges faced by state-owned enterprises in Pakistan as they attempt to meet IMF conditions and navigate a complex economic landscape.