The Ministry of Production (MoP) has reportedly proposed to Prime Minister Nawaz Sharif to privatise the Pakistan Steel Mills (PSM) as early as possible, otherwise it will shutdown in mid August this year because of non-availability of new financing, sources in the Finance Ministry toldBusiness Recorder.
The ministry had submitted the proposal at a time when the federal government was advertising for applications from suitable candidates for appointments as heads of Public Sector Entities (PSEs). However, applications were not invited for the post of Chief Executive Officer (CEO) of PSM which, according to analysts, indicated that the government was serious about privatising PSM. The performance of the incumbent CEO, Major-General Muhammad Javed (Retd), was graded as being ”very poor” by the new government.
“Over a period of time, PSM has emerged as a bottomless pit craving for more and more financial resources with dismal, even scandalous consequences. The basic fact remains that the government should be out of this business as quickly as possible,” the sources insisted. The Ministry of Production, sources said, submitted three options to the Prime Minister which are as follows;
OPTION NO. 1 Shut the mill down. The immediate benefit will be mitigation of further losses. However it will render some 15,000 regular and 1,000 contingent staffers jobless with related political outcry and possible law and order situation. This option may also entail permanent damage to production units and depreciation of assets.
OPTION NO. 2 PSM may be privatised at the earliest. The option of privatisation of PSM was exercised by the government in 2006, but the Supreme Court set it aside and ordered that the matter be referred to Council of Common Interest (CCI) afresh if the option is to be exercised. The newly-constituted CCI is scheduled to meet on June 29 this year under the chairmanship of Prime Minister Nawaz Sharif.
OPTION NO. 3 PSM may be revitalised by injection of a very heavy dosage of funding which would revamp its existing infrastructure and upgrade its capacity from current 1.1 million tons annually to 3 million tons which is contingent on technical assistance of the Russian Federation. This option is not supported by past experiences and is likely to perpetuate the vicious cycle of losses.
The sources said that a decision in this regard has to be taken by the federal cabinet after deliberations and recommendations of the Cabinet Committee on Restructuring (CCoR).
The caretaker cabinet had approved a new bailout package of Rs 11 billion for procuring raw material for the mills, but the money was not released by the Finance Ministry. According to sources, initially the caretaker Prime Minister approved the bailout package but later he backed out from his earlier decision, saying that the proposal should be reviewed by the new government.
The pre-conditions, sources said, imposed by the Finance Ministry for Rs 11 billion bailout package were not acceptable to the PSM management. On the other hand, the Ministry of Production maintained that the success of any bailout package depended on first improving governance structure by appointing competent and experienced professionals especially CEO and Board of Directors, rationalising manpower of the PSM and improving its operational efficiency.