The government of Pakistan has abandoned the plan to fully privatise or close the country’s largest industrial unit and has decided to sell a minority stake of Pakistan Steel Mills (PSM) to a strategic partner along with management control, while also approving about three-billion-rupee fresh bailout package for the entity.
On 7 Sept 2013, the Economic Coordination Committee (ECC) of the Cabinet decided that the PSM will remain a public sector enterprise, according to an official announcement. The PSM management had floated three proposals: privatise the country’s largest industrial unit, shut it down or give over Rs28bn (US$286M) to enhance its productivity level.
The ECC decided that the government will search for a strategic partner with a minority stake who will be given the option to manage the mill’s operations. The government’s decision came following Pakistan Peoples Party’s threat to block the national highway connecting Sindh with the rest of the country, if the government decided to privatise PSM.
A privatisation board, housed at the prime minister office, has listed PSM among the 71 entities that the government wished to privatise or restructure. Privatisation of 65 entities is also part of the International Monetary Fund (IMF) requirement and the government is bound to announce a comprehensive plan for the state-owned entities in the next three months.
Other than finding a strategic partner, there is no other option to stop the bleeding in the PSM, said Board of Investment Chairman Mohammad Zubair, who was also a member of the privatisation board. Replying to a question, he said the decision on retaining employees will be of the strategic partner and the government’s responsibility will only be to ensure that fair treatment is given to every employee.
Zubair said in the last five years, about 5000 more people were hired and the industrial unit was running at below 20% of capacity. The total workforce of the PSM was close to 17000 including 1900 contracted employees.
Zubair said some international companies having knowledge of the steel business have recently shown interest in the PSM.
The ECC decided to approve a three-month bailout package of Rs2.9bn ($29.6M) out of which Rs1.5bn (15.3M) will be released in September, Rs700M ($7.15M) in October and a further Rs700M ($7.15M) in November to pay the salaries of employees.
For the last five years, the PSM management has not deposit any gratuity for employees and the money was used to cover losses, which was a criminal offence, said the BOI chairman.
Source: Daily ‘The Express Tribune’, Karachi; 8 Sept 2013