THE latest bailout package for Pakistan Steel Mills is cause for deep concern. The first aspect relates to the amount in question. The package totals Rs11bn as working capital, an amount that the power sector has been gasping for but to no avail. The second troubling feature are the ‘fringe benefits’ attached to the bailout — such as a waiver on overdue gas bills amounting to almost Rs13.5bn and the restructuring of Rs36.5bn in outstanding loans. Additionally, proposals exist to pressure the finance division to facilitate tax issues. In all, this is one of the kindest bailout packages conceived for the troubled steel mills, the last one coming in at Rs14.6bn, but without the fringe benefits. The full details of the package have yet to be worked out eg the restructuring of the outstanding debt, the modalities of how the escrow account will be operated, and the waiver of the outstanding gas bills. But the fact that the package has the tacit approval of all concerned means that only the details are being deliberated, and not the broader picture.

This is the biggest cause for concern. Governments in the past have struggled with the issue of throwing good money after bad, and attempting to bail out sick enterprises like Pakistan Steel is a classic example. No matter how strict the accompanying demands for reform, these enterprises have a track record of always taking the money and running. The moment the liquidity arrives all commitments are forgotten, and the only outcome is elaborate excuses for more. This time, we are told, things will be different because safeguards will be built into the bailout. It would be better, however, if the interim government were to leave such decisions that are likely to have a lasting impact to the next government. The costs of this bailout will be borne by the next government, and it is only proper that it makes the decision on whether Pakistan Steel deserves another bailout or not.