Private Sector Advisory Group (PSAG) on steel sector has called for provision of an additional fund of Rs 30 billion to enable Pakistan Steel Mills (PSM) to run with full capacity and become a viable unit, Nauman Wazir, head of the group told APP here on Thursday. The suggestion, he said was made during a visit and meeting of private sector advisory group members in Pakistan Steel Mills.
M M Usmani, Chairman PSM presided over thr meeting. Nauman Wazir of Frontier Foundry led the group. The advisory group (PSAG) comprising of 19 major players in the steel processing industry is constituted by the Ministry of Industries and Production. The group suggested that out of the total required Rs 30 billion seed money of Rs 10 billion would be provided by the government of Pakistan and the balance of Rs 20 billion to be generated through commercial banks.
To avoid biased allocations and a quick response to international market conditions, the meeting proposed the introduction of an online e-bidding system. The system, it said would have an in-build mechanism of getting the best price and eliminate biased and discriminatory allocations.
The development of this online e-bidding software would require less than Rs 300,000 and would be operational within a month. The meeting, he said was unanimous that no steel manufacturing unit is financially viable if not operated at rated capacity. PSM, the group said would required to all arrange all necessary resources to operate at minimum 100 percent capacity.
The advisory group, Nauman Wazir said also agreed on downsizing of human resources to a maximum of 7,000 personals and in the subsequent years to reach a level of international best practice of 1,600 tons per person per year. The meeting highlighted political interference as one of the major cause of the loss of profitability.
The private sector expressed their willingness in capital investment through public private partnership in running neglected sections of PSM, especially a 500-ton rotary kiln for utilising low ferrous iron ore was proposed. They said that medieval age technology used for iron ore by micro-entrepreneurs is not only economically viable but is also causing wastage of the valuable natural resources.
They said that the provincial economic packages and Public Sector Development Programme (PSDP) should include model iron ore quarry development and infrastructure development at proven iron ore reserves. The participants of the meeting said that although cascading duty structure is very intricate and delicate needs to be revisited. The tariff disparity between imported billets/steel plates and PSM billets/steel plates and ship breaking, the advisory group suggested to be a maximum of Rs 1000.
They said that due to void of PSM billets in the local market in the last year, SR-24, A-36 and Grade-60 billets have started being manufactured successfully by local induction furnaces. However, they said the monopoly of PSM is in SAE-1008 and SAE-1010 billets. The PSM, the group said should capitalise this comparative advantage and should not lose their wire-rod clients.
They termed the import of wire-rod injurious to the sale of PSM wire-rod billets. They said that the wire-rod manufacturer would support tariff protection against import of wire-rod. The members of the private sector advisory group, during their visit to the plant excessive mill scale was observed in the slab rolling section and stack heat recovery was also not up to the required international standards.
They observed callousness in rejection and miss-roll, which they said could be corrected through minor technical interventions. The group further suggested that a private sector technical team to spend three days in production area and make technical recommendations. The meeting also suggested that after three months such private sector advisory group meeting should be held with PSM while zonal offices of PSM to have monthly meetings with their clients to get a market feed back.