EDITORIAL: Now that the federal government has approached the privatisation of Pakistan Steels Mills (PSM) in a somewhat unorthodox manner - sending all employees packing in one fell swoop - it must also overcome all the usual headwinds, restructure the entity's giant debt, and also find the right buyer(s) at the right price to make the exercise a success. One of the biggest problems that any privatisation effort in this country is always going to run into is opposition from trade unions. Indeed it was so when banks were being privatised and also when KESC (Karachi Electric Supply Corporation) and PTCL were put on the market. And already labour rights groups have demanded that the government "stop privatisation of the steel mills and other public enterprises on the dictates of the International Monetary Fund (IMF)" and duly submitted their case, against the dismissal of PSM employees, before the honourable Supreme Court of Pakistan. The two main opposition parties that rotated in power for much of the time when PSM was being run to the ground, will now move their own pieces on the board since they wrote the book on using State Owned Enterprises (SOEs) for political gains. Yet even among all SOEs that haemorrhage billions of rupees every year, PSM is rightly considered the flagship and is the only entity that can be classified as a manufacturer of basic raw material.

It is precisely for this reason - production of raw material for a host of other industries - that steel is a key industry for any country. In Pakistan, though, the steel mills is simply unable to function for all the reasons that afflict the state-owned sector. That is why various administrations have been considering ways to sell it off since at least the late 1990s. The closest it came to privatisation was of course in General Musharraf's tenure, when the matter also graced the halls of the Supreme Court for the first time. The case is so well known because it made history with the highest court in the land nullifying a done deal involving multinational parties. It is therefore absolutely essential to take all the care needed to avoid mistakes made in the last round to make sure the process is not aborted yet again. Chief among them, if experience is any guide, will be the manner in which land and other assets are priced. Since the land as well as the machinery in question is quite substantial, privatisation must only proceed with the condition that it must be done so as a going concern. That is because valuation models for going concerns are carried out in a different manner than when something is being cannibalised. The government must also retain at least 25 percent equity in the initial stages to ensure that the asset is run as a steel mill, albeit after all the measures for modernisation that are required have been executed. And if a likely investor insists on more than a 75 percent stake, then there should be a clear condition in the privatisation document that the land is only meant for running a steel manufacturing unit.

There is, of course, the matter of getting an NOC (no objection certificate) from the Sindh government, without which the matter cannot go any further. That's a problem because not only is the PPP (Pakistan People's Party) principally opposed to privatisation, it is particularly upset this time because of the retrenchment of all the PSM workers. But since SOEs are a financial black hole that cripple the budget-making process every year, and really must be privatised, perhaps the Sindh government can overcome its own objections by buying PSM and then running it. This matter has already been discussed sometime in the past, and seems as plausible an idea as any if such a wide set of differences is to be overcome; not just in the interest of industry but also all the taxpayers who foot the bill for the mismanagement. Removing the losses of SOEs from the government's books has become necessary as it looks for all the fiscal breathing space it can get.

How distant that fateful day in December 1973 seems now, when Zulfiqar Ali Bhutto laid PSM's foundation stone and the nation celebrated the prospects of self-sufficiency in steel production and considerable foreign exchange savings on the road ahead. Regrettably, neither happened. Instead, PSM led public sector enterprises in an epic tale of political opportunism, inefficiency and a lot of corruption. Hopefully, this time the privatisation process will go ahead successfully and put this horror story behind us once and for all.