ISLAMABAD: The federal cabinet has reportedly approved the retrenchment plan of Pakistan Steel Mills (PSM) approved by the Economic Coordination Committee (ECC) after the Chairman PSM Board argued Chinese are unlikely to retain existing employees, well-informed sources told Business Recorder.

The Cabinet ratified the ECC's decision of June 3, 2020, after a heated debate as some of the members were unhappy at this decision.

Official documents reveal that due to the poor financial condition of Pakistan Steel Mills (PSM), Government of Pakistan 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 for its 14,753 employees.

The number of PSM employees declined to 9,350 in 2019. 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 Government of Pakistan on account of net salary payment.

Ministry of Industries and Production further informed that in line with the ECC's decision, PSM has formulated a Revised Human Resource Rationalization Plan with the approval of its PSM Board of Directors to retrench 100% workforce of PSM. Out of the total only 250 employees would be retained for a period of 120 days for the execution of the plan and other necessary work.

All other employees would be issued termination notices once the plan is approved by the Federal Government. The financial impact of the plan would be Rs 19.656 billion that would be needed in a single tranche to pay the gratuity and provident funds of PSM employees. In addition to this, one month salary would be paid to PSM employees from the approved Supplementary Grant on account of salaries of PSM employees. Thus, the average payment per employee comes to Rs 2.3 million in case the proposed scheme is implemented.

In the ECC, the Chairman ECC inquired about vacation of houses occupied by employees of PSM in Steel Town. The Chairman PSM assured the forum that payment will be made only after the employees vacate their premises.

The Minister for Privatization advised to also coordinate with Government of Sindh for vacation of these houses to avoid any untoward incident. Secretary, Finance Division opined that any payments to the employees should be contingent upon the decision of Supreme Court. The payment should be final once and for all and should not accrue any further liability against the Government of Pakistan/PSM.

According to sources, Additional Secretary Cabinet Division informed the forum that on May 18, 2020 a Double Bench of Sindh High Court (SHC) decided on payment to all retired employees which is around Rs 20 billion before August 31, 2020.

The SHC directed the Government of Pakistan to earmark these funds in the budget of 2020-21. The court informed the representative of Finance Division that in case the amount is not earmarked/paid the Government's accounts will be attached.

On June 9, 2020, during a discussion, some of the cabinet members vehemently opposed the manner in which the employees were being terminated and were skeptical about the timing of the decision.

The members debated at length various options available to avoid termination of employees of PSM employees which included entering into G 2 G arrangement with China which it was informed, was still possible in field, and Voluntary Separation Scheme (VSS). However, Chairman, Pakistan Steel Mills, Board of Directors, Aamir Mumtaz informed that there was little possibility of the Chinese accepting the offer.

The Cabinet was informed that Rs 350 million in wages was being given despite the fact that PSM was closed in 2015. The PSM was incurring a loss of Rs 1.25 billion per month and since 2015, Rs 35 billion had been paid in wages to idle labour.

There was consensus among the members that immediate steps needed to be taken to stop the hemorrhaging of funds. It was further explained that through the retrenchment plan on average, handsome amount of Rs 2.3 million per employee would have to be paid as severance package to the PSM employees.