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Privatise PSM: Senate body




  • Senate Standing Committee on Industries and Production headed by Senator Raja Zafar-ul-Haq unanimously recommended the privatisation of a loss-making Pakistan Steel Mills (PSM) as a joint venture, saying that nation”s taxes are being wasted in bailing this entity out. 

    Additional Secretary, Ministry of Production, Shahid Hussain Asad and Chief Executive Officer (CEO), PSM Major-General Muhammad Javed (Retd) did not counter the recommendation of Senate panel and demonstrated the state of being acquiescent in relation to the proposal of privatisation of this mega industrial unit. Senate Standing Committee”s recommendation will reinforce the viewpoint of Privatisation Commission (PC) which has also proposed sell-off of PSM as early as possible to avoid further drain of the national exchequer. 

    Senator Haji Ghulam Ali, Senator Mushahid Ullah Khan, Senator Ilyas Bilour, Senator Sardar Fateh Muhammad Khan Hassani and Senator Haji Khan argued that business was not government”s job and the entity should be sold to the private sector which will turn it into a profitable enterprise. 

    Senator Haji Ghulam Ali, a former President Federation of Pakistan Chambers of Commerce and Industry, mentioned a number of success stories including Muslim Commercial Bank (MCB) which is showing billions of rupees profit after paying multibillion rupees in taxes. 

    He maintained that when all the private sector steel mills, including those of his close relatives, had been making substantial profits, the PSM (the biggest in Asia) was making a Rs 23 billion loss. Senator Bilour agreed to the proposal saying that PSM should be privatised but the process should be transparent. Senator Zafar-ul-Haq did not accept the presentation given by the CEO, saying he had seen such presentations and gloomy figures since long and directed the CEO to apprise the committee of the real picture as doubts about non-functioning and losses of the mills were increasing with every passing day and a downward trend had still not been arrested. 

    CEO, PSM informed the committee that financial liabilities of the mills were to the tune of Rs 72.935 billion as on June 30, 2012 whereas losses were to the tune of Rs 63 billion. However, latest figures revealed that losses had jumped to Rs 82 billion. He further stated that as a result of discussions between the officials of a Pakistani delegation and a Russian side, the Government of the Russian Federation conveyed its readiness to provide techno-economic assistance for a phase-wise expansion of PSM upto 1.5 million tons per year (mtpy) in phase -1 at a tentative cost of $500 million and up to 3 mtpy in phase-II (exact cost to be worked out after technical audit of plant, equipment and facilities). 

    Subsequently, following continued interaction between the two sides on the issue of PSM”s expansion, a Memorandum of Understanding (MoU) was signed in Islamabad on October 1, 2012 for techno-economic co-operation to be provided by the Russian Federation for phase-wise PSM expansion. 

    He added that after completion of preparatory work, the actual work might start by the end of the current year and the first phase to enhance the production capacity up to 1.5 mtpy could be completed in three years. He proposed that mark-up on loans for the first three years amounting to Rs 8.5 billion required for payment of immediate liabilities should be paid by the GoP against issue of shares as per business plan approved by the ECC and agreed by the Prime Minister in principle. 

    He also demanded that concessionary SROs giving extra ordinary advantages to importers and manufacturers may be withdrawn as requested by the PSM and a level-playing field be provided to PSM at par with the other stakeholders. The Letter of Credit (L/C) facility of Rs 3 billion extended by the NBP, expired on December 31, 2012 is to be renewed by the bank, according to him. 

    CEO failed to defend why the share of other provinces in job quota of PSM had been given to Sindh despite the fact that a large number of people of those provinces also needed jobs. The documents provided to the committee reveal that Punjab”s actual share or quota in manpower is 50 percent but presently its share is 24.78 percent, Sindh Rural”s share is 7.8 percent but presently it enjoys 48.73 percent stake, Sindh Urban share is 11.4 percent against it present strength of 17.3 percent. The manpower of KPK is 6.74 percent as compared to its actual share of 11.5 percent. Balochistan”s actual share is 6 percent but its strength is 1.04 percent only. GB/FATA”s quota is 4 percent but their present share is 0.47 percent and AJK 0.93 percent against it quota of 4 percent. Interestingly, no employee of PSM has been selected on merit. 

    The documents reveal that out of total strength of 15,655 regular employees of PSM 10,331 belong to Sindh whereas 5331 are from Punjab, KPK, Balochistan, GB/ FATA and AJK. PSM management did not disclose the strength of those employees whose services have been hired on contract or daily wages. Senate members expressed concern over violation of manpower quotas by the PSM management. However, CEO maintained that about 3500 regular employees will retire by 2018 after which financial burden would lessen. 

    Copyright Business Recorder, 2013

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