9,350 PSM employees: Ministry revisiting lay-off plan

Ministry of Industries and Production (MoI&P) is revisiting its plan meant to terminate the services of around 9,350 employees of Pakistan Steel Mills (PSM) en bloc on the recommendations of Pakistan Steel's Board of Directors (BoD) aimed at attracting potential investors on an open bidding instead of government to government basis, sources close to Secretary Industries and Production told Business Recorder.

Chairman PSM BoD, Aamir Mumtaz, was seen in the corridors of Ministry of Industries and Production on Thursday, visiting Minister and Secretary's office while holding a paper in his hand, which supposedly was employees' retrenchment plan. This plan will be shared with the Finance Ministry for evolving consensus prior to re-submitting it to the Economic Coordination Committee (ECC) of the Cabinet.

For execution of retrenchment plan, PSM management, through the Ministry of Industries and Production has sought an amount of approximately Rs 20 billion from the Finance Ministry.

This plan was discussed by the Economic Coordination Committee (ECC) of the Cabinet on May 13, with Advisor Finance, Dr. Abdul Hafeez Shaikh in the chair but did not sail through as the Finance Ministry was of the view that the plan must first be shared with the Ministry of Industries and Production, and questioned if the amount is to be paid at the time if retrenchment or at the same time litigation starts.

"MoI&P has been directed to first sit with Finance Division, finalise retrenchment plan and then bring it in the ECC," the sources maintained.

MoI&P, in its summary stated that due to poor financial condition of PSM, government has been paying net monthly salaries to PSM'S employees since 2013. PSM stopped its commercial operations in June, 2015 without formulating any Human Resource (HR) plan of its 14, 753 employees. The number of PSM employees has declined to 9,350. Presently, the per month net salary bill of PSM employees is approximately Rs 350 million, adjusted as a loan in the financial accounts of PSM. Since, 2013, aggregate loan of Rs 34 billion has been extended to PSM by GoP on account of net salary payment.

PSM's total expenses on its employees for FY 2018-19 was recorded at Rs 9.54 billion that is 74.7 billion of total production and operating expense. Local manufacturers engaged in iron and steel business spend approximately 3 per cent of their human resource. The average age of PSM's employees is 47 years that is above the average age of the employees working in the private steel sector - 36 years. Forty eight per cent of PSM's employees are in the age bracket of 51 to 60 years.

According to the summary, the government intends to revive PSM through privatisation process but an oversized/aged human resource is one of the main obstacles in the revival of PSM. Technical Advisory Consortium (TAC) is carrying out due diligence on different aspects including human resource of PSM before suggesting and suitable mode of transaction. At a recent development, SC while hearing civil petitions directed that the mill is not operating and producing anything, so why are the employees being retained and from where the payments are being made to them by way of emolument and other benefits? All these affairs have to be attended to immediately by the federal government, particularly the Secretary, MoI&P.

Consequently, PSM Board in its meeting on April 15 approved a human resource rationalization plan for Pakistan's Steel's workforce. The Board also requested the MoI&P to make arrangements of Rs 18.744 billion in a single tranche to pay retirement and termination dues of PSM employees.

According to Chairman PSM Board, Supreme Court of Pakistan has asked multiple questions regarding PSM i.e. what Government of Pakistan has decided regarding fate of the mills, how GoP is planning to deal with the huge staff of the Corporation, how and who is making payments to the employees by way of their emoluments and other benefits while the mills is not in operation.

The sources said, Secretary Industries and Production asked PSM management to prepare a plan for addressing these issues. In this regard, a retrenchment plan of unwarranted / undesired/ misfit employees has been prepared and submitted to the ECC.

"The government intends to reduce the size of the workforce to those officers and workers who are performing essential and critical duties," the sources added.

Minister for Railways Sheikh Rashid Ahmed, sources said, argued in the meeting that entire staff of PSM should be retrenched as most of them are doing other jobs and at the same time also getting salaries from PSM. Chairman PSM Board, Aamir Mumtaz assured the Railways Minister that all employees would be fired.

Privatisation Commission is of the view that PSM management should first define the criteria for firing the employees.

According to initial working done at PSM level, a majority of the employees will be retrenched in one go that will benefit PSM in the long run as it will substantially reduce the monthly salary bill with additional saving of Rs 12 million on account of utility expenses, subsidized facilities, petroleum expenses plus lesser liabilities which will attract potential buyers and result in smooth transaction of the mills.

The sources said senior officials of the Finance Ministry are well aware of this plan and have indicated that this is overdue.

In reply to a question, the sources said all Board members felt that this is a sensitive issue with financial and human consideration and the PSM management must handle it with appropriate care and the government should fund the termination plan appropriately. Also regarding privatisation, the point raised by the Board member from Privatisation Commission, everyone agreed that addressing the HR issues will make PSM more attractive to investors and will fetch better financial benefit to the Government of Pakistan.

The sources said Ministry of Industries and Production has to submit to the Supreme Court the HR plan for PSM employees.

The sources said PSM Board members have endorsed the resolution which says "the Board approves the plan as described by the BHRC committee minutes of April 15, 2020 to rationalize Pakistan Steel's workforce. The Board also asks the Ministry of Industries and Production to send a summary to the ECC on behalf of the federal government to make arrangements to pay the retirement and termination dues of employees,"

The sources maintained that the idea of G to G has been dropped being non-transparent as one local businessman who also owns a cricket team in PSL was allegedly using his clout in the government to bring in Chinese and Korean parties.

"Government has taken a decision in principle that this revival process will be processed by the Privatisation Commission as per its law," the sources said, adding that after the bidding process, PC will evaluate EoIs on the basis of offers.

However, a person was also seen in the Ministry of Industries and Production who wanted to meet and brief Minister Hammad Azhar and who is reportedly an agent of a Russian company interested in taking part in PSM's revival plan.