ISLAMABAD - The government has decided to turn to foreign investors for the privatisation of non-functional Pakistan Steel Mills (PSM) after Sindh government refused to acquire the national entity in the current conditions.
"We will invite investors, especially foreign, for strategic partnership for Pakistan Steel Mills in next few days," said an official of the Privatisation Commission.
He further said that the federal government had given first opportunity to the Sindh government to acquire PSM, but the province was not looking interested.
Political differences between the federal and Sindh governments had delayed the privatisation of PSM. The PSM issue is pending between federal and provincial governments since October 2015 when the Cabinet Committee on Privatisation decided to offer to Sindh the acquisition of the Mills with all assets and liabilities.
However, some of the conditions set by the province were not acceptable for the center, as it had asked the latter to share with it Privatisation Commission's Financial Advisor's technical and financial due diligence reports, restoration of gas supply to PSM immediately to avoid permanent damage to it, and sharing an appropriate 'incentive package' for the revival of the national asset.
The federal government has also missed the deadline set by the IMF to make a strategic decision to curb the ever-increasing losses and liabilities of the country's largest 'dead' industrial unit, which stood at a whopping Rs375 billion before June 2016.
In new commitment given to the IMF, the government has assured the Fund that the process would be resumed to attract strategic private sector participation in running the affairs of the Mills, given that the Sindh government is not sticking to its conditions.
"In the interim period, we are working with the PSM management to ensure that ongoing financial losses remain contained. The measures that we have taken in this regard include constantly reducing contractual employees and also minimising other expenses," the government has stated to the Fund in writing.
The country's largest industrial unit is not operational since July last year due to suspension of gas supply because of the non-payment of bills worth Rs35 billion.
The PML-N government had provided Rs18.5b bailout package to the PSM in April 2014 with the commitment to make it profitable in nine months.
However, the situation went from bad to worse as gas supply to the facility was critically reduced on June 8 last year, making the entity non-functional.
The government is paying salaries to the PSM workers from its own resources. The Economic Coordination Committee (ECC) of the Cabinet in June approved two-month salaries for the Mills’ workers, as these were overdue from February to June 2016.
The government has a plan to layoff daily wagers and contractual employees to bring down the expenditures incurred on salaries.
Pakistan Steel Mills was a profitable entity during the fiscal year 2007-08, as it earned the profit of Rs9.5 billion.
Since then, the unit has turned into a loss making entity and its accumulated losses and liabilities have swelled to Rs375 billion.