ISLAMABAD - As the production of financially-troubled Pakistan Steel Mills (PSM) has started improving due to the bailout package, the PML-N government has started the process of privatising the public sector enterprise as agreed with the International Monetary Fund (IMF).
The Privatization Commission has decided to appoint financial advisor by the end of next month of November to assist the government in privatization process of the PSM. The financial advisor would engage the multidisciplinary team of experts with a proven experience of corporate restructuring and privatization in the steel sector. “The government is likely to privatize the Pakistan Steel Mills during the first half of the next year”, said an official of the Privatization Commission. He added that government is actively working to restructure the sick national entity before its privatization, as it had released Rs 13.5 billion for enhancing its production since May this year.
Pakistan had agreed with the IMF to privatize 68 public sector entities including Pakistan Steel Mills for the bailout package worth of $6.64 billion under extended fund facility in September 2013. However, the financial condition of the PSM was deteriorated when PML-N took the charge in June 2013 and government believed no party would be interested in privatization sans its restructuring. Therefore, the Economic Coordination Committee (ECC) of the Cabinet on April 25, 2014 had approved Rs 18.5 billion bailout package for the revival of PSM in a bid to restructure the national entity before going for its privatization. The privatization of the PSM had two parts, as first govt will restructure it and will go for its privatization when its production capacity enhances to 40 per cent, which was supposed to be done by the end of ongoing year.
The production of the PSM started increasing after the bailout package, enhancing to 25 per cent in September from 3 percent of May 2014 due to the financial bailout package. The revival plan was envisaged in achieving 77 per cent capacity of the PSM till June 2015. The government has now decided to initiate the process of the privatization of the Pakistan Steel Mills after its production has increased.
Pakistan Steel, facing accumulated losses of Rs 255 billion, is one of the first big organisations to go under the hammer under government’s privatisation plan. However, sources in PSM informed that they need additional eight billion rupees to enhance the production capacity to 77 per cent as planned by the government.
It is worth mentioning here that government had disinvested the shares of two entities including United Bank Limited (UBL) and Pakistan Petroleum Limited (PPL). Meanwhile, the government would privatize 27 public sector entities during ongoing financial 2014-2015. The government would generate at least Rs 300 billion through privatization programme during FY2014-2015, and this amount is far above the Finance Ministry’s estimates of Rs 198 billion that are projected from privatization programme in the budget 2014-2015.