PSM’s delisting from sell-off list: BoD requests ministry to move Cabinet for review

ISLAMABAD: The Board of Directors (BoD) of Pakistan Steel Mills (PSM) has reportedly requested the Ministry of Industries and Production (MoI&P) to approach Cabinet for an independent review of failed privatisation of PSM, well-informed sources told Business Recorder.

The matter of delisting of Pakistan Steel from the privatization list came up on the agenda of the recent Board meeting. After four long years, the government of Pakistan has decided to delist the PSM from privatisation list.

The Board took the decision with both regret and relief but observed that although this was a natural next step, it does leave the matter of the revival of the Mills without a clear plan or roadmap.

Senate body to decide PSM’s fate within 3 months

The Board has requested the Ministry of Industries and Production to forward a request to the Cabinet to launch an independent review of the failed privatization project of Pakistan Steel, so that findings and recommendations for improvements in the process can be obtained.

Furthermore, the Board was also informed about the recent formation of a Committee by the SIFC’s APEX Council that is chaired by the Prime Minister, to convene meetings concerning the Pakistan Steel Mill’s future and the different land-related problems that PSM faces. The Board was also informed that suggestions had been forwarded to the SIFC and the relevant Ministry in this regard.

“The privatization of Pakistan Steel was a 4-year long project, involving hundreds of personnel from various departments (Privatization Commission, Transaction Advisors, Ministry of Industries and Production, Pakistan Steel Management and Board). Considerable resources were spent on the project, yet it failed to deliver a result. Apart from the vast financial losses and lost opportunity, this failure also had a negative effect on the morale of the local communities and the nation as a whole,” the sources quoted Board as saying.

Insiders are of the view that the Privatization Commission had cited ‘poor economic conditions’ as the main reason. However, there were many other issues including the condition of the asset when it was put up for sale, structural issues, decision to switch from a Public Private Partnership (PPP) mode to outright sale, ignoring liability settlement, capacity and capability of the Privatization Commission and its Advisors, flaws in the process etc. that need to be reviewed formally and a set of recommendations for changes and reforms need to be produced so that future privatization projects can be executed more successfully.

“Review of the PSM project must be carried out by an independent group (personnel that are not part of the above-mentioned parties). Hence the Board has requested the Ministry of Industries to take this matter up with the cabinet for consideration,” the sources continued.

When approached for comments, the Chairman of the Board, Aamir Mumtaz said that the review is a good idea as the intention is to identify ways to improve and optimize the process and not to fix blame as the project was a difficult endeavor.

“Any reform initiatives that might arise as result of such a review will help all the concerned Ministries including Privatization to become more effective. In its current form, the process is too cumbersome, likely to take a very long time and deliver poor value to the tax payer as shown by the PSM privatization project,” he added.

Mumtaz further stated that the workings of the Cabinet Committee on Privatization also have room for improvement. It tends to overload the Privatization Commission and overlooks the need to reform it. Pakistan needs a culture of workouts, restructuring, revival and laws that facilitate these activities.

“If one of our objectives to sell is to reduce losses, then effective restructuring would do that. Selling off without first fixing the underlying problems that cause the losses in the first place, inevitably leads to the government still owning many of the problems and future risks/losses, post-sale,” he continued.

He opined that Pakistan has not been good at managing these enterprises, but queried: should the policymakers not work on improving ourselves rather than giving up?

“There is always the clamor of cannot run it, so let’s sell it!” As a nation we have to get better in this area and avoid being pressured into selling for this reason only or selling without first fixing the underlying flaws. The recent SOE laws enacted to improve the management of SOEs are a good step in the right direction but the results will depend on one question, ie, do we have the right human capital in the right places, hired on merit and held,“ he said.

Copyright Business Recorder, 2024