ISLAMABAD: The caretaker government has reportedly decided to privatise Pakistan Steel Mills (PSM) on Government to Government (G2G) basis, as Privatisation Commission has failed to finalise restructuring plan in eight years, well informed sources told Business Recorder.
On October 4, 2023, the Apex Committee comprising caretaker Prime Minister and the Army Chief discussed privatisation of State Owned Entities (SOEs) such as PTCL, Pakistan Steel Mills, Discos, HEC, RLNG plants, legacy privatisation projects K-Electric, PTCL/Etisalat).
The Cabinet Committee on Privatisation (CCoP) is likely to take key decisions, in its meeting on Friday (today).
PSM expenditure since its closure: ECC directs FD to submit details of cost borne by govt
Chairman PSM Board of Directors (BoD), Aamir Mumtaz, in separate letters to caretaker Prime Minister and Chief of the Army has claimed that the restructuring of Pakistan Steel Mills is almost complete. However, the main outstanding item is the settlement of its liabilities to the GoP which requires Government’s attention. Over 80% of the total annual losses are now due to the interest on the liabilities to its creditors.
He further stated that as a cost reduction exercise, Pakistan Steel is also waiting to receive approved funds to complete its final stage of workforce rationalization.
On privatisation of PSM, Chairman BoD has claimed that the recent privatisation/revival program was conceived in 2019 but after the passage of four years, there has been little progress in reviving the Mills.
He said, during the last three years he expressed his concerns with the approach that was adopted to revive Pakistan Steel on numerous occasions, verbally and in writing.
According to Aamir Mumtaz, his conclusions are: (i) the prerequisites of the ongoing transaction cannot be completed by working through the regular process of the Privatisation Commission;(ii) no private company or consortium alone will be able to do much with the Mills unless there is extensive involvement and support from the GoP;(iii) Pakistan cannot afford to waste any more time persisting with any work and must change course. Therefore, there is no merit in Privatisation Commission in privatizing Pakistan Steel.
He recommended including PSM under the auspices of the SIFC with options of G2G, local and foreign consortium, leasing arrangements, partial or full revival, potential new Mills at this location alongside the old mills can also be explored with a combination of local and international investors which may be cheaper and based on modem technology. Additionally, proposals for additional large-scale industries at PSM’s industrial zone can also be developed.
The sources said, the Prime Minister Office referred the letter of Chairman PSM Board to the Ministry of Industries and Production with the direction that any correspondence be made through the administrative Ministry.
Pakistan Steel has three large institutional creditors, SSGC, Government of Pakistan and National Bank of Pakistan. All three creditors, including the Government of Pakistan are booking mark up on this debt at considerably high rates. Consequently, these debts are adding Rs.20 billion approximately every year in interest charges to the losses of PSM which is close to 70% of the total annual losses of the corporation.
The sources further stated that even after the passage of so many years since the Mills closed down in 2015, these liabilities remain unresolved. Various initiatives to arrive at a negotiated settlement with creditors have been made, but to no avail. Attempts were made to reduce the burden of the interest ranging from writing off of all interest to at least freezing it from the date the Mills were closed in 2015.
PSM now owes GoP Rs.102 billion in principal and Rs.48 billion in interest, National Bank of Pakistan is owed Rs.38 billion in principal and Rs.38 billion in interest and finally SSGC is owed Rs.23 billion in principal and a disputed amount of LPS on this amount. SSGC is asking for Rs 40 billion LPS on base amount of Rs 23 billion.
Copyright Business Recorder, 2023
Comments
Comments are closed.