Pakistan Steel Mills losses surge to Rs246 billion in 15 years, AGP calls for urgent restructuring

Pakistan Steel Mills Corporation Limited’s accumulated losses have surged by more than 1,355%, rising from Rs16.9 billion in FY2008-09 to Rs245.9 billion by FY2023-24, according to the latest report of the Auditor-General of Pakistan (AGP).

The AGP report said the state-owned entity remains under severe financial stress despite having stopped operations in 2015.

The audit highlighted several governance and financial control issues, including the non-finalisation of financial statements for FY2023-24 and FY2024-25.

It also pointed to non-reflection and improper recording of equity worth Rs11.05 billion, weak ownership records for 1,675 acres of land and an unauthorised executive assignment in violation of Sections 16 and 17 of the SOE Act.

According to the report, finished product stock worth Rs17.6 billion has remained idle and unsold for nearly a decade despite the closure of operations.

The auditors also flagged financial leakages linked to unresolved theft cases, asset mismanagement and unauthorised occupation of 1,929 residential units.

A recurring discrepancy in water supply costs has caused an annual loss of Rs1.126 billion, the report said.

The financial analysis showed that PSM suffered an average annual net loss of Rs25.5 billion between FY2008-09 and FY2023-24.

The only profitable year during the period was FY2021-22, but the report said the profit came from asset revaluation rather than business operations.

To keep the entity afloat, the Government of Pakistan provided loans totalling Rs106.2 billion between 2013 and 2025.

The highest annual support was recorded in 2020 at Rs37.9 billion, followed by Rs14.8 billion in 2014 and Rs11.3 billion in 2013. The later tranches declined to Rs824 million in 2024 and Rs2.9 billion in 2025.

The unaudited financial statement for FY2023-24 showed a net loss after tax of Rs25.5 billion.

The report said fixed costs, including salaries, utility bills and debt servicing, continue to add pressure on the national exchequer despite the mill’s non-operational status.

Cost of sales declined from Rs59.03 billion in FY2008-09 to Rs7.45 billion in FY2023-24 due to the shutdown of operations. However, administrative expenses rose from Rs2.18 billion to Rs7.38 billion during the same period.

Distribution costs fell from Rs367 million to Rs40.8 million, while finance costs increased from Rs464 million to Rs20.04 billion due to higher borrowing costs.

The report said revenue generation collapsed after the mill’s closure. PSM earned Rs122.38 billion between FY2008-09 and FY2014-15, but post-closure revenue from FY2015-16 to FY2023-24 stood at only Rs14.23 billion, mainly from the sale of leftover inventory such as billets and slabs.

Trade debts rose by 236%, increasing from Rs5.23 million in FY2023 to Rs27.6 billion in FY2024, while provisions for doubtful debts remained unchanged at Rs3.5 billion.

The balance sheet showed total equity at Rs495.45 billion in FY2023-24, compared with Rs243.94 billion in June 2021. However, the report noted that the increase was largely due to land revaluations.

Total liabilities rose from Rs177.41 billion in FY2016-17 to Rs357.99 billion in FY2023-24, further weakening the company’s liquidity position.

The AGP recommended immediate restructuring of Pakistan Steel Mills, appointment of a regular CEO and preparation of a revival plan through public-private partnerships or asset leasing to contain further losses.