Why has Chinese company distanced itself from PSM?

MUSHTAQ GHUMMAN

ISLAMABAD: Expressing concerns on massive electricity bills of PSM, Economic Coordination Committee (ECC) of the Cabinet has sought details of terms and conditions of employees from Privatisation Division, official sources told Business Recorder.

China's Boa Steel Group which showed keen interest in acquiring PSM, has withdrawn from proceeding further due to current strength of employees which is far more than international standards. Recently, a ten-member Iranian delegation visited Karachi to examine the possibilities of acquiring the mills. PSMs employees total strength is 12,500 whereas Iran was running a steel mill of PSM's capacity with 7500 employees.

The sources said Privatisation Division recently noted that the ECC of the Cabinet in its meeting held on November 10, 2016 had approved the payment of three months salaries to the employees of PSM i.e. for June, July and August, 2016 from the funds available with PSM received on account of lease of land to Port Qasim Authority (PQA). However, the decision regarding sales of PSM inventory to meet its day to day expense was left pending.

Pursuant to the ECC decision, PSM revealed that the salaries of PSM employees could only be paid up to mid August, 2016 as other miscellaneous expenditures such as electricity, water, medical and Leave Fare Allowance (LFA) to the PSM employees had been made prior to the decision of the ECC of the Cabinet.

Privatisation Division further stated that the production of PSM was at a halt since June 2015 when SSGC had reduced gas pressure to the bare minimum. Since PSM had exhausted its finished inventory and it was also not permitted to sell its unfinished inventory without prior permission of PC, PSM would require Rs 190 million to pay day to day expenses in order to keep the mill operational at the required heating mode.

Privatisation Division apprised the meeting that the employees have not been paid salaries for the past three and a half (3.5) months i.e. since mid August, 2016 to November 2016, therefore, the ECC may consider the following proposal: "Disbursement of remaining 50 per cent for August 2016 amounting to Rs 190 million and Rs 380 million for September 2016 i.e. a total of Rs 570 million."

PSM has not been audited for the last three years and it is difficult for auditors to evaluate the actual price of the national asset. The auditors have also not decided that PSM should be privatised as a going concern.

During ensuing discussion, Minister for State for Information Technology and Telecommunication stated that PSMC had demanded Rs 75 million for the payment of electricity bill, which was quite substantial as currently the Mill was almost non-functional. She further asked whether Steel Mill was paying bills of its employees and maintained that PSM management should clarify whether these payments were being made as a result of contractual obligation or otherwise. The Chief Financial Officer (CFO) PSM, Arif Sheikh stated that at present total strength of the employees was 12,500 and the payment of electricity bills was a part of the terms and conditions of the employment of PSMC employees.

The ECC approved the release of one and half month salaries of the employees from mid August to September 2016 and directed the Privatisation Division to submit details of the terms and conditions of the PSMC employees (under which the electricity bills are being paid by the Pakistan Steel Mill) to the ECC.