The Sindh government is reportedly not interested in acquiring the currently non-operational Pakistan Steel Mills (PSM) until the federal government offers incentives to the province at par with the private sector, well-informed sources told Business Recorder. The provincial government, sources said, had enquired from the PSM management whether the federal government was ready to offer any fiscal incentives in case Sindh acquires the mills; the response was that the Economic Co-ordination Committee (ECC) of the Cabinet in its decision has said that the entity should be offered to Sindh government on the basis of as is, where is.
A couple of weeks ago, PSM wrote a letter to provincial Finance Minister, Sindh Syed Murad Ali Shah, asking for the intent, if any, of the provincial government to acquire PSM. The provincial government replied that since the federal government is not ready to extend fiscal incentives the provincial government cannot proceed ahead. The sources maintained that the offer given to the Sindh government remains "unanswered" despite the passage of several months.
"Due diligence requires just a couple of months, not years. Provincial government should have sent its formal response by now," the sources added. Senator Taj Haider maintains that the government deliberately suspended gas supply to the mills, and recently proposed a meeting be held between two members of Sindh government''s committee comprising Senator Salim Mandviwala and Sindh Finance Minister, Syed Murad Ali Shah, and high-ups of Privatisation Commission to explore the possibility of a sale.
However, when Senator Salim Mandviwala was contacted, he stated that there had been zero update on PSM. The Mills union has moved to Supreme Court and the government is playing games. SSGC has filed a case against PSM for payment of gas bills as per plan by the government.
Cabinet Committee on Privatisation (CCoP) is likely to meet prior to the eleventh quarterly IMF review meeting to be held in Dubai in which progress on interaction with Sindh government will also be presented along with a proposed future strategy. A meeting of PSM Board of Directors (BoD) has been convened on April 28, 2016 to get the approval of "employees'' rationalization plan" and other issues.
An official told Business Recorder that PC is also recommending to the government that salaries to the employees should be paid monthly instead of quarterly as on the one hand the government pays salaries and on the other is facing criticism for delayed payment.
PC has asked the management of PSM to submit bifurcated details of the employees as per the directions of the ECC of the Cabinet till June 2015. PC has also requested the government to approve the pay arrears and salaries of employees. It has also been proposed that the essential expenditure on bills over and above salaries which is around Rs 80-90 million per month should either be paid by the Government of Pakistan or the mills should be allowed to pay for it from sale of inventory.
PSM''s affairs are being run by those including the acting Chief Executive Officer Wasif Mehmood who is widely held responsible for the current worst position of PSM. Chairman Privatisation Commission, Muhammad Zubair, in a letter to the newly appointed Secretary Industries and Production, Khyzar Hayat Gondal, said that since the operations of PSM stand totally closed since June 2015 due to closure of gas supply, the government is releasing Rs 480 million per month as salaries for the employees on humanitarian grounds. Under the circumstances, the rehiring of contractual employees in the PSM is totally unjustified.
Zubair advised the Secretary MoI&P that necessary instructions be passed on to the management of PSM to immediately terminate the contracts of all employees rehired in PSM after June 2015. According to sources, the cost reduction plan prepared by the management of PSM on the directives of the ECC does not mean that employees are being removed but it is an exercise to ascertain how many employees are rehired soon after retirement.
According to the IMF, privatisation of PSM has been put on hold as the company was offered to a provincial government. Should this offer be declined, the authorities are optimistic that the privatisation process can be completed by end September 2016, the tenth review notes.
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