Chairman, Pakistan Steel Mills (PSM), Aamir Mumtaz has said that with the passage of each day the prospects of reviving the Mills are diminishing, well-informed sources told Business Recorder. Mumtaz, who is an American national took over the position of Chairman with the "blessings" of Prime Minister's Advisor on Commerce, Industries and Production, Abdul Razak Dawood. Some circles in the government have expressed doubts about the capacity of the Chairman to revive such a huge entity which has been non operational since mid of 2015.
"The Mills are not in operation and with the myriad of issues, it will be very hard for a partner to revive them without some level of restructuring and problem resolution," the sources quoted him as saying.
The Chairman who recently interviewed some candidates for the position of Chief Executive Officer (CEO), PSM, maintains that during the last five years, the Mills have been closed and very little has been done to stem the losses and restructure the company or try to revive some parts of the mills adding that "it is unadvisable to perpetuate this attitude and sit on our hands and just watch the Privatisation Commission's process to play out. There are many problems and opportunities that can be tackled parallel."
According to sources, Chairman has conveyed to the federal government that the PSM Board and Management have a duty of care and fiduciary responsibility to prevent further deterioration of PSM's balance sheet and its organization. The MoI&P and other Ministries have the same responsibility to manage the PSM to prevent further losses and deterioration of the mills. All parties have a duty to actively work to solve its problems. Additionally, he added that one cannot expect the "Transaction Advisor" to solve PSM's problems. At best he can make suggestions and provide advice but all the solutions are with the government.
PSM is a state owned entity that has been out of operation since 2015, with its actual decline as a viable business commencing in 2012. During this period, it has accumulated huge losses and is beset by a large number of severe problems. The Mills are losing an unacceptable amount of money every month and with the passage of each day the prospects of reviving the Mills are diminishing.
Prime Minister and the government have resolved to restructure the Mills to a viable business entity, in the shortest possible timeframe. To this end the government has brought in new leaders and managers to spearhead the revival process. This team will require obsessive and driven mindset to overcome the hurdles in the revival process. It will also require the full support and backing of the government and Prime Minister.
The core component of the revival strategy is to bring in external investors and operator who will invest and risk their own money to refurbish, upgrade and expand the mills and operate under a concessionary agreement. For this to take place, PSM has to undergo restructuring to manage liabilities, legal actions, allowing a partner to be inducted, negotiations and settlement with creditors, development of a strategy and plan for paying outstanding dues to retired employees and existing staff, strategies to stem losses and many other issues along these lines.
Talking about revival plan, Chairman PSM stated that Public Private Partnership (PPP) bidding process will take approximately six months. From the moment a partner is signed up, it will take a further 18 months for the mills to open fully at 1.1 MTY capacity and during this time losses will continue to accrue.
According to Chairman PSM Board, perquisites that need to be met for partner / investors are as follows: (i) quoting a potential partner- BOT mode requires the Pakistani government to provide policy support, legal guarantee, necessary resource conditions and good social order and economic environment for investment, building and operation for the project; (ii) in its current state, it is impossible for a third party to come and start the revival process. One cannot expect to just hand over the Mills to a partner who will deal with all the problems. The Mills are not in operation and with the myriad of issues, it will be very hard for a partner to revive them without some level of restructuring and problem resolution; (iii) at best the government may get some funds from the investors/ partner but it will be very difficult to get them to take on the other problems, and it may come at a very high price for the country; and (iv) PSM Board and GOP have to lay the ground work for the induction of a partner/ investors by making available a ' clean' entity that is not encumbered by the legacy (legal, financial, political and social ) issues.
He has fixed three goals for his team, i.e., reduce losses from Rs 1.5 billion per month which according to him would be an aggressive target, preparation of workforce for the mills revival and preserve and restore physical assets as best as possible.
The key issue of PSM is that its debts and liabilities have crossed Rs 500 billion as of December 2019 but no steps have been taken to at least stop financial drain of Rs 15 billion per annum.
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