ISLAMABAD: The government has decided to permanently shut down Pakistan Steel Mills (PSM), a state-owned enterprise that has been incurring heavy losses since 2009.
This was stated by Dr Muhammad Fakhr-e-Alam Irfan, federal secretary of Ministry of Industries and Production while briefing Senate Standing Committee on Industries and Production meeting which was held here on Wednesday under the chairmanship of Senator Aoun Abbas.
Dr Irfan said the Sindh government has been offered to take control of over 700 acres of the total 18,000 acres land of the PSM and establish its own steel plant on the site.
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The secretary Industries and Production further told the committee that the caretaker government had made some amendments regarding the privatisation of this PSM.
There is no buyer of PSM in the market yet, the government is considering scrapping it and using the land for other purposes and the federal cabinet has also approved it. He said there was no record available either the PSM land is a property of the federal government or the Sindh government.
Dr Irfan said the PSM land was acquired as state land, adding that to use the land for other purposes provincial government’s permission was needed. He said the government has decided to use the PSM land for establishing Export Promotion Zone/Industrial Zones.
He said the caretaker provincial government had allowed the caretaker federal government to use the land but the current provincial government has reviewed the decision of the caretaker government.
He said the Sindh government will establish a new steel mill on an area of 700 acres of land while the rest of the land will remain the property of the PSM. He said that the Ministry of Industries and Production was awaiting the decision of the Sindh Cabinet in this regard. Responding to a question of the chairman committee, the secretary said that it was stated that an attempt was made to sell high-quality iron as C-category but it failed.
Briefing the panel, the representative of the PSM union requested the committee that the employees of the PSM wanted to know whether they are entitled to 12 percent or not and whether PSM can be restored or not and give a comprehensive report. He also challenged the figures provided by the PSM officials to the committee and said that these figures are incorrect and the land of PSM cannot be used for export promotion zone.
The standing committee directed him for the provision of details in the next meeting. Senator Saifullah Khan Niazi, expressing serious concern over the non-appointment of a regular chief executive officer of the PSM, said the government should appoint a permanent CEO of PSM at the earliest.
The chairman committee asked “what is the status of the board of governors of this institution? Full details of members of the board should be provided in the next meeting.”
The chairman committee and other members while expressing their displeasure over the absence of the federal Minister for Industries and Production Rana Tanveer Hussian, said that parliamentary committees are an important part of parliament and federal ministers should ensure their presence in the committees.
The committee members said that the presence of ministers help the panels to reach conclusion, make decisions and ensure implementation. Senator Dost Ali Jeesar said that the gas of steel mills should not be shut off, otherwise, there will be problems to run the plant.
While briefing the committee, PSM Chief Financial Officer (CFO) Arif Sheikh claimed that the federal government has decided to close down PSM due to its poor performance and financial losses.
The mill, which was established in 1974, has been facing financial difficulties for the past decade. The CFO claimed that the volume of PSM employees’ annual salary is Rs3.1 billion and in the last 10 years, the government has paid Rs32 billion in salaries. Additionally, the mill has consumed Rs7 billion worth of gas in the last decade, Arif said, blaming “politically-influenced recruitment and permanent staffing” for the sinking of the state-owned enterprise.
In 2010, the CFO added, the government decided to regularise the services of 4,500 daily wager employees, which resulted in an additional cost of Rs12 billion. He said that PSM management in 2010 had informed the federal government of financial constraints but then Pakistan Peoples Party (PPP) government assured the PSM management of providing sufficient funds.
He said that up to 2008, the mill was operating at 80 percent capacity but in 2008 global recession engulfed the steel industry worldwide as a result PSM was also affected. Moreover, in 2008, the total strength of PSM employees was 27,000 which after 2008 reduced to 20,000 but still 13,000 above the total requirement of 7,000.
Earlier, the Ministry of Industries and Production directed the authorities of PSM to discontinue the supply of gas to the steel plant, effectively rendering the revival efforts of PSM futile.
According to a notification issued by the Ministry of Industries and Production, the chief executive officer of PSM has been instructed to halt the supply of gas to the Pakistan Steel plant.
The circular stated that gas supply to important parts of Pakistan Steel’s plants, including blast furnaces, was severely restricted since June 2015, with the aim of preventing significant components like blast furnaces from being completely closed. Pakistan Steel had estimated losses of Rs22.4 billion as of June 30, 2023, while gas obligations reached Rs33.5 billion.
The panel was informed that the total value of PSM asset was Rs861 billion as of 2021 audit which included Rs2.12 billion moveable assets and Rs858 billion immoveable assets of which the total cost of the land stands at Rs622 billion. He said that total liabilities of PSM stand at Rs335 billion. He said that acquired Rs138 billion loan in the past 10 years and paid Rs103 billion on interest.
Copyright Business Recorder, 2024
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