''New owner of Pakistan Steel will have to spend $1.3 billion''

The new owner of Pakistan Steel will have to spend $1.3 billion over and above its actual price to replace 25-year-old machinery that is not properly operating at the moment.
"Whoever buys Pakistan Steel will have to inject an additional amount of $1.3 billion for replacing and overhauling the machinery," a government official was quoted as informing the Senate Standing Committee on Industries.
The committee met here on Tuesday with Senator Muhammad Akram in the chair and discussed in detail the proposed privatisation of Pakistan Steel.
A committee member told Business Recorder that the government had decided not to inject any more equity into Pakistan Steel for BMR - a technical term for machinery replacement - before its privatisation and the investment would have to be made by the new owner.
"We (committee) were told that the machinery of the country''s industrial giant was not in best of the operational condition and new owner will have to replace it for efficient functioning," Pakistan Muslim League (PML) Senator Dilawar Abbas told this scribe.
However, the government did not come up with anything that whether the matter would be considered at the time of working out a formula for fixing floor price for Pakistan Steel shares, Dilawar said.
Dilawar said the government had also informed the committee that only 4,400 out of the total of 19,000 acres Pakistan Steel land would go to the buyer.
While the federal government, he added, would occupy the rest of the land to settle Rs 7.5 billion liabilities of the Pakistan Steel, the senator said.
However, there is a controversy going on between the federal and Sindh governments on who has the legitimate right over the rest of (14,600) Pakistan Steel land.
Dilawar said Pakistan Muslim League (PML-N) Senator Sadia Abbasi was the only member who opposed the proposed privatisation of Pakistan Steel owing to its strategic importance.
But some other lawmakers, including Professor Ghafoor of Muttahida Majlis-e-Amal (MMA) and Akbar Khwaja of Pakistan Peoples Party (PPP) also did ask the government to avoid rushing the matter.
However, a statement issued by the Senate Secretariat did not mention this. Rather, it said the members were all praise for the proposed Pakistan Steel privatisation.
Dilawar said he himself asked the government to convert Pakistan Steel into a private limited company and float between 20-25 percent of its shares into the open market through stock exchanges before privatising it.
"This could have given the countrymen a chance to be the owners of the industrial giant and, thus, a few of them could have made their way into its board of directors," Dilawar said.
The senator said he did float a similar idea before the privatisation of PTCL.
But since the process of Pakistan Steel''s privatisation has gone further to this stage, this idea would be of no use.
A Senate Secretariat statement, meanwhile, said the committee was informed that Pakistan Steel was the first integrated iron and steel works of the country that was set up with techno-economic collaboration of former USSR and incorporated as a public limited company.
The committee was informed that Pakistan Steel''s performance had followed a checkered pattern since its commissioning and that there were many ups and downs and at times there were apprehensions the mill would have to be closed down.
However, the government initiated a restructuring exercise with a view to salvage the sinking ship of Pakistan Steel and the results were satisfactory.
As a result of financial restructuring, Pakistan Steel was able to pay off the principle amount of Rs 11.35 billion out of the accumulated long-term liabilities of commercial banks, amounting to Rs 19.117 billion in 2002-03, nine years ahead of the due date.
The committee was also informed that Pakistan Steel had a regular manpower of 20,533 in May 2000 when the voluntary retirement facility was introduced.
The regular manpower presently stood at 12,987. Despite erratic supply of coal and iron ores during the year, Pakistan Steel managed to improve its capacity utilisation to 95 percent.
Some members, however, expressed the view that since Pakistan Steel was a strategic unit, the government should not go for its privatisation in haste and that interests of the country and the labourers should be kept in mind.