ISLAMABAD: Chairman Pakistan Steel Mills (PSM) Aamir Mumtaz has proposed to the Special Facilitation Investment Council (SIFC) to engage with Chinese State Owned Enterprises (SOEs) for revival of the mill and make it a primary supplier of steel products for future CPEC infrastructure projects, sources in Ministry of Industries and Production (MoI&P) told Business Recorder.
The PSM is one of the key entities which are to be sorted out by the SIFC. The forum is considering annulling current bidding process for privatisation of Steel Corp, an entity established to privatise the mills’ assets, and possibly using the entire land of PSM as EPZ.
The Chairman PSM Board has welcomed all serious and sincere efforts to find a reasonable solution to the public sector entity and proposed that the SIFC Implementation Committee should order and supervise the resolution of key outstanding restructuring tasks (liability settlement, final retrenchment and utility account transfers).
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Sharing thoughts on solution and opportunity sourcing, Chairman PSM Board has emphasized that an exercise should be launched immediately to consult and discuss with all parties (local and international) who have, in the past, expressed an interest in participating in the revival project of Pakistan Steel which will lead to development of proposals. All such proposals will then be brought back to the SIFC to review and approve.
He further contended that this is necessary to find solutions to the challenges facing the Mills and to take advantage of the opportunities that new technologies offer.
The current expansive footprint of the Mills has built-in production inefficiencies and also leads to high land component in the overall value. This exercise should be conducted with an open and broad mindset with the aim to bring to the table proposals that will have maximum positive impact on the economy of Pakistan. It should not rule out any option, mode and scope.
“These proposals should include any transaction mode (leasing, BOT, PPP or sale of shares),” he added.
Aamir Mumtaz further stated that it should also be open to more expansive possibilities such as multiple Steel Mills by individual investors on smaller (sub 300 acres) parcels of Pakistan Steel land, Steel Mills with newer and modern technologies (electric arc and compact/mini steel mills), collaboration with Tuwairqi Steel Mills that may aid its revival, use of Pakistan Steel Mills vast and valuable infrastructure as a shared service to a Steel Mills complex and emphasis on joint ventures and technology transfers.
He expressed the hope the SIFC will provide the appropriate framework for procurement or transaction execution that is not only within the relevant laws but is also expeditious and insulated from falling prey to red tape.
Furthermore, the SIFC is expected to provide an arrangement that ensures continuity of institutional support to the project, as executing the transaction and carrying out commercial and engineering works that will be intensive and arduous. The interested parties will need reassurance that the Government has installed the appropriate transaction framework that delivers a result.
In case investor response is lukewarm for whatever reason, GoP must (use own resources) start finding creative solutions to restore some production of the Mills. This will also serve to strengthen government’s negotiating position.
On localization, the Government must remain focused on developing the capabilities of local workforce and exploitation of local resources so that any rebuild plan for the blast furnace should be tied to the development of Pakistan’s Iron Ore mining industry.
He proposed that tariffs will need to be re-evaluated to support long term steel industrial policy and revival of Pakistan Steel.
On China’s interest in PSM, he said that during the last four years. the matter of the revival of Pakistan Steel Mills was raised with the Chinese Government on many occasions. This was on the agenda of at least two Prime Ministerial visits that took place during 2019 to 2022. On each occasion, the help of the Chinese Government was sought to bring back Pakistan Steel into service.
The Chinese Government officials (including the President and Premier) were sympathetic and instructed the relevant Chinese State-Owned Enterprises to cooperate and work with the Pakistani authorities. The Chinese preference was a government-to-government (G2G) deal and bringing this matter under the auspices of the CPEC program.
“My opinion was sought by the then government and I indicated that I will support whatever the Government of Pakistan decides.
However, I also recommended that such a transaction should be negotiated between the relevant parties,“ he said, adding that the primary party at that time was the MCC (Metallurgical Corporation of China) and preferred a G2G CPEC framework using their own funds (without requiring public funding and sovereign guarantees). They preferred a model where they could actively negotiate terms with Pakistan, rather than go through a bidding process.
“I was also supportive of this approach and confident of negotiating terms that would be the best possible for Pakistan in this situation. My push to explore reviving the mills under the umbrella of CPEC was driven by another factor,” Aamir Mumtaz said, adding that he was of the view that Pakistan Steel should be made part of CPEC with the stipulation that maximum steel used in the CPEC projects should be manufactured by Pakistan Steel. This project should be given highest priority, production restored and steel products supplied to CPEC infrastructure projects.
He recommended that it may not be advisable to raise this matter with the Chinese Government again. They may be forced to remind Pakistan that they have already offered help in the near past on several occasions and the issues have been on Pakistan side to move forward.
Chairman PSM Board proposed that it might be better to start working with the representatives of Chinese relevant state-owned enterprises and if necessary, the Government of China can be engaged at a later stage.
Secondly, once production is restored, Pakistan Steel should be contractually designated as the primary supplier of steel products for future CPEC infrastructure projects.
Copyright Business Recorder, 2023
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