"Steel mills [Pakistan Steel Mills (PSM)] is a venture which can be stated as harbinger of progress, agent and multiplier of development in its own right, sine qua non for move on the road to multi-facet emancipation".
Gains out of steel mills go farther than what direct money flows can measure.
To measure the segmental cost, only real/relevant additional operation costs should be accounted. 'Real costs' of segments should comprise: direct labour, related material and power consumption plus direct overheads. This may pave way for economic production by 'not so far duly activated' segments.
Issue of long term bonds for the liabilities to financial institutions and utilities, with remissions, should be explored. Salaries outstanding beyond two years and salary related issues be referred to a select committee to decide on merit, including through issue of bonds for the dues.
Outstanding dues of federal, provincial or local government, payment of which is not feasible, be written off. In case, the federal government is unable to have the provincial governments, etc., yield to this proposition, the matter may be got resolved by the federal government through conciliation or arbitration.
The government may provide a rebate of up to 50% on future income tax liability for a period of 10 years commencing with re-commissioning of the mills. The Income Tax Laws should have no 'period limit' with reference to claim of PSM for tax relief on account of losses incurred. Pakistan Steel should be empowered to carry over the tax credit arising out of losses without a period bar.
The government may provide a rebate @ 25% of import duty on all imports by the steel mills for a period of five years, by way of bonds. At the steel mills option, these bonds should be adjustable by a tax payer against all sorts of dues payable to the government(s).
On expiry of a five-year period, after re-commissioning of the mills, experts should come-up with prescriptions with reference to taxes to be applied on the steel mill. This would mean 'no tax' on the steel mills for five years.
The steel mills should have 5/6 (parallel) sub Boards, to superintend working in different areas. Main Board's decision making powers should be passed on to these sub-boards. Decision taken by a sub-board should be taken as decisions of the (apex) Board of Directors. Unlike the convention, the steel mill should have a figure head for the position of Chief Executive whose main task should be co-ordination. He should report to the apex board.
Other than constitutional issues, these sub-boards should be possessed with all the normal powers of a Board/chief executive. The apex/co-ordination board should simply endorse decisions of the sub-boards, basically to fulfil requirements of Company law. The Main (Apex) Board should be vested with powers to decide the issues relating to jurisdiction of the sub-Boards. Besides managing conflicts between the sub-boards, its duties should include bringing to light frivolous references by government functionaries. The Apex Board should exercise control on Human Resources, including appointment of consultants, advisors etc. and decide their respective fee/remuneration.
Reporting at each sub-Board meeting should include relevant progress on areas like procurements, production, sale, inventories, exports, imports, financial projections and capacity utilization. In reporting, besides monetary units, 'outcome' in physical terms should also be given.
Decision-making within the steel mills Board of Directors domain should be transferred to the sub-boards on the basis of their nature rather than on their size (monetary outlays).
Induction of officers in the steel mils, Grade-17 and above, should be by a committee, under the Apex Board, consisting nominees of: (i). IBA (ii). ICMAP. (iii). ICAP. (iv). Agha Khan University. (v). Board of Directors of the steel mills. This committee should also decide elevation cases of steel mills officers to Grade-17 and above.
Private sector equity in the company should be restricted to 10 to 15 percent, with no individual holding above 1%. Private sector should collectively have one director on the board nominated by FPCCI.
Capital of the steel mill should be reduced by the amount of losses booked. After the suggested exercises, the balance sheet should candidly bring out this position. Fresh capital should be inducted, enabling the steel mill functioning.
The above steps will go to discipline the mills, usher computation of proper return on equity, facilitate future dispersal of shares and serve the object of expansion.
(The writer is former Chairman Joint Committee of ICAP & ICMAP, the writer is a Corporate Counsel. E-mail: mufti1002001@yahoo.com)