After years of indecision, political back-and-forth, and prolonged institutional paralysis, the fate of the Pakistan Steel Mills (PSM) is finally being reshaped. On May 30, 2025, Pakistan and Russia signed a formal agreement to establish a new steel manufacturing facility at the same site where the once-proud PSM complex still stands. The agreement marks a significant step forward, both symbolically and strategically, in what could be a new era for Pakistan’s beleaguered industrial sector.
STEEL INDUSTRY
After years of indecision, political back-and-forth, and prolonged institutional paralysis, the fate of the Pakistan Steel Mills (PSM) is finally being reshaped. On May 30, 2025, Pakistan and Russia signed a formal agreement to establish a new steel manufacturing facility at the same site where the once-proud PSM complex still stands. The agreement marks a significant step forward, both symbolically and strategically, in what could be a new era for Pakistan’s beleaguered industrial sector.
According to the agreement, the new plant will be developed on 700 acres of land within the existing 1,675-acre PSM estate and will cost $2.6 billion. It is planned to be commissioned within two years. A joint working group has already been formed to facilitate the project’s planning and implementation. This development comes at a time when the government has also begun the formal process of wrapping up the old PSM: services of 1,350 more employees were recently terminated, and the federal government has announced that liabilities amounting to Rs345 billion will be cleared by liquidating PSM assets.
Once a flagship of national industrial ambition, the Pakistan Steel Mills in Karachi was a cornerstone of the country’s development strategy. Established in the 1970s with technical and financial support from the then-Soviet Union, the mill was intended to make Pakistan self-reliant in steel production, reduce imports, and create a solid foundation for domestic manufacturing. For a time, it fulfilled that promise. During its peak in the early 2000s, the plant reached nearly 94 per cent of its production capacity and even turned a profit.
But the promise began to erode as governance failures took root. Placed on the privatisation list in the early 2000s, the PSM became the subject of controversial and poorly executed divestment efforts. A key moment came in 2005–06 when a consortium of Saudi, Russian and Pakistani investors offered $362 million to acquire the mill. However, the Supreme Court intervened and blocked the sale, citing concerns about undervaluation and transparency -- an action widely seen as prompted by political pressure. The decision, though made in good faith, turned out to be a strategic blunder. From that point onward, the financial and operational decline of the PSM became irreversible.
By 2015, the mill had ceased operations entirely. But instead of decisively resolving its future, successive governments allowed it to linger in bureaucratic limbo. Large administrative structures continued to exist despite enormous losses and a non-operational status. In July 2023, the government finally announced that the mill would be permanently dismantled. Still, clarity and direction were missing.
From the theft of machinery and materials worth billions of rupees to unchecked land grabbing, the PSM’s decay has exposed the weaknesses in Pakistan’s public-sector governance. For the new project to succeed, these lessons must be internalised
Curiously, just two months after this announcement, a new chief executive and an 11-member board of directors were appointed -- not to rehabilitate the mill but to oversee its dismantling. Around the same time, a Russian delegation visited Pakistan and discussions began on establishing a new steel plant on the same site. By January 2025, the federal and Sindh governments were still mired in negotiations on whether to jointly revive the old structure or back a new project entirely. At one point, the federal government offered 700 acres of land to the Sindh government to lead the development. This proposal was soon overtaken by a federal decision to pursue the project directly in partnership with Russia.
These mixed signals reflect a long-standing lack of coherence in Pakistan’s industrial policy. While Pakistan Steel stood idle, accumulating losses, valuable state land was being encroached upon or handed over under dubious arrangements. In 2007, the Sindh government unlawfully took over 1,377 acres of PSM land, which remains unresolved in court. Recently, the Public Accounts Committee of parliament decided to refer these cases to the National Accountability Bureau (NAB), a step that might finally bring some accountability to a process long plagued by neglect and malpractice.
The new plant will be based on advanced Russian steelmaking technology if it materialises as planned. Over the past decade, Russia has incorporated many of the latest innovations in steel production, including automation, energy-efficient furnaces, and streamlined logistics systems. This aligns with Pakistan’s urgent need to modernise its industrial base. The country currently faces a steel demand-supply gap of over three million tons and imports iron and steel worth more than $2.7 billion annually. With rising infrastructure needs and growing manufacturing demands, domestic steel production is not just desirable but strategically essential.
Still, building a new plant alone will not resolve the deeper issues. The story of the Pakistan Steel Mills is a cautionary tale of how mismanagement, politicised decision-making and lack of institutional continuity can destroy even the most promising ventures. From the theft of machinery and materials worth billions of rupees to unchecked land grabbing, the PSM’s decay has exposed the weaknesses in Pakistan’s public-sector governance. For the new project to succeed, these lessons must be internalised.
Transparency, competent leadership and insulation from political interference are essential prerequisites for success. The proposed joint working group between Pakistan and Russia should include independent professionals, financial experts, and technocrats to ensure that the project remains focused and efficient. Moreover, the new plant’s human resource strategy must be grounded in merit, not patronage -- a mistake that contributed heavily to the PSM’s earlier downfall.
This new venture presents a rare second chance to restore Pakistan’s capacity for domestic steel production. But that opportunity will be squandered if old habits persist. The government must act decisively to support the new project and close the long-standing mess at the Pakistan Steel Mills.
The ruins of the old mill may yet give rise to a symbol of industrial renewal, but only if we have the will and vision to learn from the past and build for the future.
The writer is retired chairman of State Engineering Corporation
