PSM losses swell to Rs400 bn

Govt decides to privatise mills within three months

KARACHI: The Pakistan Steel Mills (PSM) losses have swelled to Rs400 billion and the government has decided to auction the PSM within three months.

The PSM is running a loss of Rs215 billion during the tenure of the Pakistan Muslim League-N (PML-N) government while the total loss has reached Rs400 billion. The federal government has decided to auction the PSM and for this purpose, a new chief executive officer has been appointed for three months.

According to the notification issued by the government, a Grade-21 officer and Export Processing Zone Authority Chairman Mumtaz Ali Shah has been given the additional charge as PSM’s chief executive officer and he tookIt was stated in the notification that Mumtaz Ali Shah was appointed till the privatisation of PSM and the process of privatisation would be completed within three months.

  Reuters adds: Chinese and Iranian state-owned companies are interested in taking over loss-making PSM as part of a long-term lease deal, Privatisation Commission Chairman Muhammad Zubair said on Wednesday.

Built by the Soviet Union in 1970s, state-owned PSM has become a huge drain on government resources and shuttered steel production in 2015. The government hoped to sell PSM but struggled to find buyers and faced opposition to the sale from the Sindh government, as well as a powerful union which represents many of the 14,000 PSM workers.

Zubair said the government was still open to selling PSM but a long-term lease was now likely, with Chinese and Iranian companies showing “interest” in taking over the vast factory on the outskirts of Karachi.

“We will go for a 45-year lease and are targeting foreign investors, as well as local companies,” Zubair said.

He added the sale and any possible lease would have to be approved by the Privatisation Board and the Cabinet Committee.

The commission will hold investor roadshows in Lahore and Karachi next week to gauge local interest in PSM. Zubair said some local companies had shown interest in the PSM but declined to name them.

Pakistan promised the International Monetary Fund (IMF) that it would privatise PSM and Pakistan International Airlines (PIA) as part of the $6.7 billion national bailout loan agreed in 2013.

Though the IMF programme finished in September, the government failed to privatise either of the entities in time. While PIA remains operational, PSM has suffered decades of under-investment and would require huge upgrades to be competitive with steel makers in countries such as China.

Zubair said the government was willing to offer a long lease as an incentive for investors to put money into modernising PSM. “For a company like this, with so many liabilities and this kind of state, you have to make major structural changes, put in a new plant, get new equipment,” he said. “It makes sense to have a 45-year lease instead of 30 years or less.” Zubair said this process had delayed privatisation efforts and led to the commission restarting the process.