The long awaited privatisation of the Pakistan Steel Mills Company (PSMC) was completed last week when the entity went to the highest bidder, a consortium led by a Saudi business group, Al Tuwairqi, which also includes Magnitogorsk Iron and Steel Works of Russia, and Pakistan's own Arif Habib Securities.
It had offered Rs 16.80 per share for a 75 percent stake, whereas the other consortium, short-listed for the final bidding, had offered Rs 16.50 per share. The deal is to fetch the government a handsome amount of Rs 21.680 billion, while only 4500 acres of the PSMC land would be handed over to the new owners and the rest of 14500 acres are to be retained for other projects.
The representatives of both the consortiums have termed the bidding process satisfactory, whereas the mill's union has called the sale price peanuts. The government would do well to rebut all allegations of the union in detail to clear the air and nip all insinuations of wrong doing in the bud.
The winning consortium's biggest stakeholder, Al Tuwairqi - one of Saudi Arabia's top five industrial groups - has also been busy preparing for the ground breaking ceremony of a steel mill of its own in Karachi at an estimated cost of about $300 million.
Obviously, it needs both projects. As the group chairman, Dr Hilal Al Tuwairqi, explained the other day, "We are coming with the world class latest technology and equipment as we realise the growing demand of Pakistan and regional countries."
Steel mills being fundamental to industrial development in any country, it goes to the credit of former prime minister Zulfiqar Ali Bhutto that he commenced the process to set up the country's first steel mill with the help of the erstwhile Soviet Union.
It was duly flaunted as the 'pearl' of Pakistan's economy. However, like so many other public sector enterprises, it began to lose its lustre as successive governments began using it as an employment exchange to give jobs to their political supporters and hangers-on.
Over time, it became synonymous with corruption and inefficiency, and began to incur huge losses. It was only during the recent years that special efforts were made to turn around the entity so as to auction it off as part of the privatisation process.
The Cabinet Committee on Privatisation is now getting ready to put Oil and Gas Development Company Limited (OGDCL) as well as Pakistan State Oil on the auction block. That is the logical next step. However, what the government might want to do with the proceeds from the present sale and the ones that are to happen next, is a matter that deserves clarification.
It may be recalled that some time ago the government had announced that a major chunk of the proceeds from the privatisation process would be spent on debt retirement, and the remainder would go into poverty alleviation programmes. But the plan now seems to have been completely forgotten. During the last one year the government has been borrowing heavily, and incurring new debts instead of pay back the earlier ones.
What is particularly disturbing about this trend is that fresh debts are being contracted not only to fund new development schemes, but also to run the government. Such unproductive expenditures surely are not reflective of an inclination to maintain tight fiscal discipline, which is extremely necessary given the poverty level in this country.
Transparency and good governance being the current buzzwords in Islamabad, it is important that the government keeps the public informed about what it intends to do with the privatisation proceeds. Towards that end, it must begin presenting quarterly reports showing application/utilisation of privatisation proceeds before Parliament.
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