ISLAMABAD   -   Strategic Asset Expert Group on revival of Pakistan Steel Mills has informed the government that five international firms have shown interest in the revival of the mill and recommended that PSM should not be privatized or shut down.

However, setting aside the recommendations of the Expert Group on the steel mill, the ECC of the Cabinet has asked the Privatization Division to the list the PSM for privatization.

A number of internationally renowned steel sector companies including firms from Russia and China have expressed interest in investing and revival of PSM. These companies include Sinosteel Equipment and Engineering Company Limited, Tyazhpromexpert, Hebei Dongghua Enterprises Group Company Limited, China First Metallurgical Group Company, JSC REP Holding/Fateh Group.

It is pertinent to mention here that Cabinet Committee on privatization in its meeting in October 2018 decided to delist PSM from the privatization list. ECC of the cabinet in its meeting held on 7th November, 2018 directed ministry of industries and production to put up an operationlization plan of PSM within two months. An expert group was constituted to work out operationalization plan for revival of PSM on pro-bono basis with the approval of Prime Minister. On 8th January 2019, ECC extended the time for submission of revival plan of PSM by March 2019.On 8th April Expert Group gave a presentation to the ECC about the proposed revival plan of PSM. The Expert Group in its recommendations said that PSM should not be privatized or shut down as it is a stretigic asset of national interest.

According the Expert Group, revival of Pakistan Steel Mill is technically possible through a phase wise approach targeting first the downstream HRC/CRC milling operations with parallel revamp/retrofit of upstream equipment to restore 1.1 million tons/annum capacity followed by expansion to 3 million tons per annum.

The experts further said that in order to make PSM operations profitable and sustainable, the current organization structure has to be rationalized(manpower and non core departments) and aligned with international best practices. The land assets available with PSM could be leveraged to settle the outstanding liabilities of Rs 206 billion.

The land should be sold for industrial purposes which will boost job creation. However, a detailed review of the applicable regulations needs to be undertaken by the federal government. Government of Pakistan should incentivize development of indigenous iron ore and coal reserves for consumption in PSM by offering a supportive fiscal incentive and regulatory package for mining companies. Government should establish a Public Private Partnership (PPP) to raise the necessary capital investment and obtain the requisite technical expertise for successful revival, expansion and subsequent sustainable operations. GOP should appoint a transaction Advisory Consortium(TAC) to design appropriate PPP structure followed by leading a transparent international Competitive Bidding process to select the preferred bidder and propose/implement the liability settlement plan.

Instead of following the recommendation of the committee the ministry of industries and production requested the ECC to put the PSM on privatization list and appointment of transaction advisory Consortium for revival of PSM through advice to the government on set of appropriate PPP models.

The ECC meeting, held on 3rd May, observed that in the revival plan of PSM it was proposed that land asset of the mills may be utilizaed for settlement of its outstanding liabilities of Rs 206 billion. However, due to some observations of the government of Sindh this option has not been found viable. It was suggested that available land of PSM other than steel mill may be utilized for establishment of steel related industry for generation of revenue.

The meeting was informed that some Russian and Chinese companies are interested in running PSM. But major issue of PSM is clearance of its huge outstanding liabilities. After detailed deliberations, the ECC approved to place PSM on privatization list and directed privatization division to initiate due process of privatization of the entity.

It was also directed by the ECC that implementation of revival plan based on private sector inputs may be initiated and a report thereof be submitted to the CCOP within six months of its consideration. The hiring of the transactional adviser and evaluation of the foreign investors showing interest in the PSM would be the responsibility of the privatization commission.

The ECC directed the ministry of Industries and Production to make formal proposal in this regard to CCOP which is competent forum for the purpose.