PSM revival plan gains momentum

Investors from Turkey, Russia and China have expressed their interest to revive Pakistan Steel Mills (PSM) on Repair, Operate and Transfer (ROT) basis.

The federal government has, in principle decided to carry out a revived plan for the country's largest steel plant, which is shut down since June 2015 owing to a financial crisis and gross mismanagement. Recently, the federal government appointed as well experienced US-based Pakistani entrepreneur Aamir Mumtaz as chairman PSM board. Amir has voluntary offered his services for revival of Pakistan Steel Mills in the national interest.

Chairman BoD Aamir Mumtaz told Business Recorder that the federal government is taking serious steps to resume the operation of PSM, however, as per revival plan the mills will not be privatized and government of Pakistan will remain the owner of the PSM and its assets.

A financial advisor has already been appointed for due diligence of the PSM and the revival team is closely working with the advisor, which will submit its due diligence report in six months, he added.

"Currently we are working on two tracks. Under the first track, we are trying to reduce losses and preparing the mills for revival. While, under the track two mills to be handed over to a strategic partner for revival on ROT and Public Private Partnership (PPP) basis," he added.

The strategic partner will be required to provide the working capital to resume the operation, and expand the capacity phase-wise from 1.1 million to 3 million tons annually, he added.

He said the government is committed to providing all possible facilities to the interested parties for revival of PSM. "Currently, some investors and leading steel groups from China, Turkey and Russia have shown interest in revival of the country's largest steel plant, while some offers from the US and Europe-based companies are likely to be received in the next few weeks," Mumtaz said.

As per estimates, some $500 million to $1 billion will be required for complete revival of operation and later expansion of the mills. The interested party or consortium will be solely responsible for the revival of the mills without any interference from the Ministry of Industries or the federal government.

Chairman PSM Board said the PSM will be handed over to any company after the complete evaluation to ensure the capability and productivity. The profit of the PSM will be distributed among company and government of Pakistan as per a sharing formula decided at the time of agreement.

He said under the revival plan it has decided to split the mills into two parts - plants and assets including land, coal jetty and guest houses, etc. Entire steel plant will be handed over to the interested or qualified consortium; however, the land and other assets will remain in the control of the government of Pakistan.

Mumtaz said that until a strategic partner agrees to take control of the PSM, it is also under consideration to reactivate some of the plants with support of domestic companies to prepare the mills for complete revival and generate revenue for operational expenses. The management is negotiating with steel bar and auto manufacturers, tinplate producers, and some other companies for resumption of some of plants, he added.

He mentioned that the strategic partner will be allowed to bring its own team including top management including Chief Executive Officer (CEO) and Chief Financial Officer (CFO) to run the mills in a professional manner.

He accepted that currently PSM is overstaffed due to political appointments and there is need to curtail the workforce to make the entity profitable. Currently, the PSM has over 9,000 employees including 131 engineers, 22 officers and 2,174 working staff. The PSM is also facing shortage of skilled workforce; therefore, a skill development program will be initiated.

He said that PSM's debt has surged to Rs 229 billion, including Rs 62 billion of National Bank of Pakistan (NBP), Rs 58 billion of federal government, Rs 56 billion of employees and Rs 40 billion of SSGC.

He said currently, the salaries of thousands of employees are being paid through bailout packages from the federal government and the entire workforce is getting salaries without any output.