Pakistan Observer

Pakistan Steel Mills crisis

Muhammad Daheem

Tuesday, January 10, 2012 - The industrial and economic development of a country is not possible without the establishment of a steel plant. It was necessary for Pakistan to establish a steel mill to make progress in the modern world. The US, UK and their allies were reluctant to sell a steel plant to Pakistan. American, British and French private firms were strictly prohibited to export steel plant or steel manufacturing items to Pakistan. It was a tough job to establish the Pakistan Steel Mills. The dependence on other countries, in steel production, could cause a huge loss in the development of the nation. Naturally Pakistan was struggling to launch a steel mill from General Ayub’s era. The very concept of still mill in Pakistan was a threat to exploitative imperialistic forces.

Pakistan Steel Mills was founded in January 15, 1985. The gigantic project was carried out under the overall supervision and techno economic assistance of former Soviet Union. Nonetheless, the consortium of Pakistani construction companies played an important role in its establishment. The basic purpose of the Mills was to build a basic economic infrastructure and industrialise the country at a faster pace. It is Pakistan’s largest heavy mechanical industrial complex with 20 component units. Professor Dr. Niaz Muhammad, Wahab Siddiqui and Russian scientist Mikhail Koltokof are considered to be the real founders of Pakistan Steel Mills. Niaz Muhammad, the Pride of Performance holder, was a diligent person. His services were also highly appreciated by the USSR. A large number of employees including scientists and technical staff got training from him.

Pakistan Steel Mills is located at a distance of 40 Kilometre Southeast of Karachi. It covers an area of 18,600 acres. The main plant covers an area of 8,070 acres while 200 acres of land is covered by industrial water reservoir with a capacity of 110 million imperial gallons per day. It is the largest reservoir in Asia. It has a production capacity of 1.1 million tons of raw steel. This capacity is not very economical. Nonetheless, the Mills had a built-in potential for expansion up to 3 million tons. Pakistan Steel had 28,000 employees in 1991 while it required less than 14,000 personnel. It produced 0.75 million tonnes steel annually.

It started at an estimated cost of Rs14.287 billion and commissioned at a cost of Rs 24.7 billion in 1985. The average production efficiency of the mill is not more than 70 to 80 percent probably because of the inferior quality of the machinery. The Pakistan Steel Mills manufactures industrial material such as steel, coke, pig iron, rolled billets, long rolled steel, hot and cold rolled coils and sheets, galvanized coils, corrugated sheets and heavy iron products.

The company also sells by-products created during steel production, including coal tar, granulated and boulder slag, Ammonium Sulphate, Oxygen, Nitrogen, and refractory bricks. The pivotal role of Pakistan Steel Mills cannot be ignored in the making and strengthening of Pakistan Defence. The Mills also supports Pakistan’s defence production in producing tanks, planes, ships, missiles, nuclear programme and more. The Mills has leasehold rights over an area of 7520 acres in the area of Thatta district.

It may be interesting to note that Pakistan Steel Mills remained a profitable organization from 2001 to 2008. Even then the Musharraf regime, in May 2006, privatised it. Saudi Arabia-based Al Tawairqi Group of companies, Russia’s Magnitogorsk Iron & Steel Works and local firm Arif Habib Securities paid a meagre amount of Rs21.6 billion ($362 million), or Rs16.8 per share, to take control of Pakistan’s largest steel manufacturing plant. It is believed that privatisation of the Steel Mills was made under the pressure of certain foreign institutions such as IMF during Musharraf’s era. The whole process of privatisation was considered as the ‘largest dacoity’ in the history of the country. Moreover the employees of the Mills raised a lot of hue and cry against the government’s decision. The reaction against the government’s unwise decision was intense; it rocked the government. The Transparency International-Pakistan concluded that the deal was not fair as it was not acceptable for some competent bidding parties. On June 23, a nine-member bench of the Supreme Court annulled the sale of the country’s largest industrial unit to a three-party consortium due to irregularities in the process of privatisation. The apex court concluded that the government decision in relation to Mills had been taken in unexplained haste, ignoring profitability aspect and assets of the Mills and directed the government to refer the matter to the Council of Common Interests within six weeks. The apex court made it clear that squandering of national assets would not be tolerated.

Pakistan Steel Mills is facing a severe financial issue nowadays. It is operating in a tough competition atmosphere. It is facing loss of billions of rupees. It has to pay off huge bank loans and government taxes. It is, in fact, on the verge of collapse and bankruptcy and has asked government for 10-12 billion rupees bailout package to come out of crisis while Cabinet Committee on Reforms has approved a bailout package worth Rs6 billion to tackle the situation. There may be many factors for the current crisis in Pakistan Steel Mills including low capacity utilization, liquidity crisis, rise of the cost of coal in the international market, mismanagement on the part of administration and political involvement and interference from the government side.

The Mills has become a residence of the powerful mafia involved in corruption. The Federal Production Minister Anwar Ali Cheema wants that still mills should be privatised because of unbearable financial burden. He claims that Pakistan Steel Mills is a sick unit ‘whose losses are getting out of control’. The question is: who is responsible for the huge losses in the Mills? Is this a deliberate attempt to create an atmosphere for the privatisation of the Mills?

The Russian firm, Tiag Proom export company, has shown its interest to reconstruct and restructure Pakistan Steel Mills and make it a profitable organisation with new machinery and modern technology. According to Rizichenko, the Director of the company, the production of PSM can be increased to 0.4 million tons annually. A number of employees can also be adjusted in this process.

Unfortunately this Corporation has been working without a permanent and full-fledged chief executive officer for the last several months while the losses are increasing day by day. It is stated that a particular mafia is trying to make excuses to legitimise the privatisation of the organisation. This mafia is still struggling to purchase the Mills at very low price. It is said that certain corrupt bureaucrats and high-ups are actively engaged in their planning to further destablise economic situation of the organisation.

The financial condition of the Steel Mills has deteriorated rapidly. The employees are much worried about their monthly wages or salaries. Several power generation units have been shut down. There is a shortage of raw material and production has been reduced further. The management of the Steel Mills has been blamed for using billions of rupees from the workers’ gratuity and Provident Funds. Because of the crisis of capitalism on a world scale, the position of the national economy is already well known to the general public.

It is stated that the CBA People’s Workers’ Union is playing the role of a big mafia as it has lost its link with the real workers of the Mills. These union leaders have their own vested interests. There are complaints of corruption about the union representatives and union office holders. A number of shops run by these persons have been exempted from duty. They are going to safeguard their own vested interests instead of fighting for the workers’ rights. It is believed that Union has been exploiting the administration for their personal benefits and has failed to present any appropriate charter of demands for the welfare of the workers. The corruption culture in the recruitment and employment of the irrelevant unprofessional persons has made it a sick industry. It’s high time appointments made on merit.
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