ISLAMABAD: Pakistan Steel Mills (PSM) Board of Directors has reportedly discussed further retrenchment of employees and marketing of the transaction with investors, well informed sources told Business Recorder.
PSM has already sacked over 4500 employees in the first phase after formal approval from the Federal Cabinet and now preparations for the second phase are underway as the government wants to give PSM to investors without any liability.
"The Board discussed different routine matters and hiring of evaluators," the sources added.
The meeting which continued for three hours, discussed progress on the privatisation process of the mills. However, the main issue, the government is facing is that no company is ready to work with the government for evaluation of PSM assets i.e. 1,367 acres of land and plant.
For instance, when PSM advertises to hire an evaluation firm, the response is poor as firms are unwilling to work with the government, fearing that they will not get contractual payment. In addition, they also fear that in future they may face litigation.
Insiders claim that the advertisement for hiring evaluators was given in most of the unknown regional newspapers.
They further claim that the contracts of two senior officials with military background are also being extended, including one facing harassment in Women Harassment Commission.
"The Board is not independent in taking decisions as in all cases consent of government is mandatory. The members only participate in superfluous discussions and raise objections on different proposals but do not take decisions," the sources continued.
The figures of losses and liabilities of PSM presented by different government functionaries do not match.
Prime Minister has claimed that liabilities of PSM are Rs350 billion, Minister for Industries and Production Hammad Azar claims liabilities are Rs230 billion, PSM retrenchment letter says liabilities are Rs212 billion whereas for the transaction structure committee liabilities are Rs302 billion.
Official documents reveal that in pursuance of the Cabinet Committee on Privatisation (CCoP) decision of November 16, 2020, duly ratified by Federal Cabinet, the Minister for Privatisation chaired a meeting of the Committee on December 10, 2020. The meeting was attended by the nominated committee members, whereas, Advisor to the Prime Minister for Institutional Reforms, SAPM on Petroleum, and SAPM on Power attended the meeting on special invitation.
Details of the following two transaction structure options were presented before the Committee, while apprising the members that PC Board had approved/ recommended the first of the two options to the CCoP initially in its 4th meeting held on September 2, 2020 and had reaffirmed it in a subsequent meeting held on September 23, 2020 which are as follows: (i) transferring of identified core operating assets into wholly owned subsidiary of PSMC through Scheme of Arrangement (SoA) (as provided in the Companies Act 2017) followed by sale of majority shares of the newly formed subsidiary (without transferring of full ownership) to strategic private sector partner; and (ii) transferring of identified core operating assets to private sector strategic partner through concession/lease agreement for 30 years.
Ministry of Privatisation further noted that after detailed discussion, the Committee unanimously concurred with the recommendations of the PC Board, as presented before the CCoP on November 16, 2020 and approved transaction structure.
The Committee members also held detailed discussion, with regards to the following areas; (a) quantum of shareholding of the proposed new subsidiary to be divested to strategic private sector investor; (b) alternate options on whether Jetty & Right of Way (ROW) infrastructure be made part of the transaction or continue to be owned and operated by PSMC and PQA respectively; (c) prospective investment size and upgradation of PSMC to three Million Tons per annum; etc.
The Committee members agreed to the PC recommendation that firmed-up proposals with respect to these matters will be brought before the PC Board and the CCoP after interaction with the prospective investors and feedback received from them.
Ministry of Privatisation requested the CCoP to consider the following transaction structure for approval as per recommendations of the PC Board made on September 2, 2020, and reaffirmed on September 23, 2020, and concurrence/ recommendations of the Committee given in its meeting held on December 10, 2020: "transferring of identified core operating assets into wholly owned subsidiary of PSMC through Scheme of Arrangement (as provided in the Companies Act 2017) followed by sale of majority shares of the newly formed subsidiary (without transferring of full ownership) to strategic private sector partner."
During the ensuing discussion, Chairman CCoP emphasised the need to expedite the privatisation process to ensure that, at least, some of the ongoing transactions are completed before the end of current financial year.
According to sources, Sindh Government has not approached the Federal Government as yet, to operate the steel mills.
"Sindh Government wants to take all the assets including precious land of PSM sans liabilities, which is not possible," the sources continued.
When contacted, Chairman PSM Board Aamir Mumtaz said that the overall plan for retrenchment was approved by the Government (ECC/Cabinet) and the Board a while ago as reported in the media. However, there was no discussion on this topic in the latest meeting.
"The Board is grateful for the Government to fund such large liabilities (retirees and retrenchment) when PSM is a limited liability company and responsible for its own liabilities," he said adding that the Government did this at a time when it has its own fiscal challenges. These two items add up to a significant amount for the government.
Mumtaz maintained that the Board is fully supportive of the government's plan for privatisation of PSM. The Board addressed and approved actions required by the Privatisation Commission to complete their project.
The other main items that the Board and Management are trying to tackle are reducing losses, generating funds to cover own expenses, land issues, legal issues and some HR renewals and approvals etc. to maintain continuity and avoid interruptions in key tasks for restructuring and privatisation.
He, however, did not respond that if the Board has given extension to few officials, who are facing charges of women harassment.
Copyright Business Recorder, 2021
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