MAJOR General Zaheer Ahmed, an experienced officer from the Corps of Electrical and Mechanical Engineers, and the newly appointed head of Pakistan Steel Mills, faces an uphill task. The incoming CEO has nothing but a few scattered pieces with which to start the task of putting the prostrate and bleeding giant back on its feet.

As Pakistan Steel Mills is classified as a strategic asset, its handling of its affairs has to be at that level. This implies a long-term vision of development of society and industry, vagaries of economics, and complexities of law and dynamics of national politics.

Only an informed, rational and nimble footed leader with in-depth understanding of linkages of structures of power is likely to last in Pakistan Steel. It is no surprise that in 45 years of its life so far, the Mill has had 25 chairmen and six CEOs, giving each of them an average tenure of less than 18 months. Now compare this with the tenure of over 20 years of Korea’s General Tae-Joon Park as chairman of the Pohang Iron and Steel Company.

The viability of PSM is not an issue, but the yoyo pattern of its cyclical profits and losses certainly demands scrutiny.

Although, management audit of ongoing practices in production, marketing, procurement, repair, maintenance, refurbishment, logistical support, personnel management, general administration and security will be much in order, such an exercise should also bring into focus issues that lie more in attitude and mindsets rather than in arithmetic.

The general has come to a bankrupt organisation that is working at 3pc capacity. It has no raw materials and banks are reluctant to extend any further credit to it. It has piled up liabilities of over Rs120bn, and continues to carry a monthly wage bill of over Rs400m.

Some months ago, it was reported that a sum of Rs5 billion, as a part of a bailout package of Rs11 billion, was lined up to help the Mill solve its raw material and staff salary problems. Payment of two months’ salaries has coincided with the general’s appointment. But nothing is yet known about disbursements for purchase of raw materials.

If the Mill is not revived, as restructuring is the latest position in the government’s changing posture, it will become a case for distress sale. Distress selling of such a strategic asset will not be politically savvy.

The path to recovery begins with the most important resource in the kitty — the human resource of Pakistan Steel. Given defined targets and motivation, the employees can deliver. Start with their input on the internal economy, repair and maintenance, and assess what can be done for value addition.

Open a dialogue with the employee unions on the essentials of a wage policy that would ensure continuity of PSM, which, in turn, would lead to workers’ prosperity. Short time sacrifices should not be construed as deprivation, but as vital investment for betterment.

At this point of time, PSM employees could well be asked through their unions to be a part of the revival effort and accept a temporary reduction in wage, which should be restored as soon as break-even is achieved.

Take a look at the capabilities and capacities of the steel fabricating unit (Pakistan Steel Fabricating Company Ltd), and see with what, and by when, it can be activated. With a bit of imaginative marketing and innovation at the shop floor, it can be turned into a great revenue earner.

Redesign the scheme of priorities of application of funds. Obviously, procurement of raw materials will be the first priority, and the rest could follow.

Concentrate on production and its wherewithal. Convince the government to make Pakistan Steel operational and free from insecurities; it should just make a one-time grant, equal to the purchase price of some six month’s raw material stock. With this amount, a revolving L/C for raw materials could be opened, and the amount recovered through sale proceeds could be fed into a revolving fund.

With a specified process and workable arrangements for oversight and guarantees, this fund should remain available to finance the Mill’s bulk procurements and prevent misuse through misplaced priorities or intentions.

With improved operational cycle, Pakistan Steel may find it very difficult to persuade financial institutions to open negotiations for a debt-equity swap option as the first step on which a transparent, equitable and meaningful privatisation process could be built.

The government also needs to revive — as soon as possible — the Russian proposal to expand the Mill’s capacity to 3m tonnes and revamp existing units. As an incentive, the Russians and other augmenting machinery suppliers could be encouraged to join hands with local private investors to bid for 26pc of the Mill’s shares. This could be the second step towards privatisation.

PSM should be transferred only to a corporate body with experience in steelmaking, with the capacity and willingness to continue its operations as an integrated steel mill. It should also be ready to make additional investments into the Mill’s expansion and modernisation.

The writer is a retired army officer, who has served in a number of industrial and commercial organisations