It is heartening to note that the minister for industries and production is keen to re-strengthen and re-structure the steel and engineering sector. His good intentions are reflected in the decisions taken recently to implement the long-awaited plans for capacity expansion of the Pakistan Steel (PS) and up-gradation and modernisation of Pakistan Machine Tool Factory.

Seemingly, these industrial units have also been taken out of the privatization list. It is very encouraging as public sector has a catalytic role to play in development of engineering industry, and resultantly, in the industrialisation of a country.

The proposed expansion of the PS has been on cards for the last many years. In fact, the original plan of setting up The PS envisaged its future expansion to an annual capacity of over two million tons. The study, prepared by the Soviet Design Institute Lengipromez, was later revised, in 1987, proposing expansion up to three million tons.

The same year the World Bank consultants W.S. Atkins of the UK carried out a report on the steel sector in Pakistan having projected a demand of over three million tons per annum. Based on these studies the management obtained, in March 1989, principle approval of the government for expansion project. This followed the submission of the requisite PC-1 by the PS in March 1994.

Subsequently, the Nippon Steel Corporation of Japan undertook the economic and technical feasibility study. In 1997 the government’s high level task force made recommendation of increasing the existing annual installed capacity to three million tons with diversification of its products, shifting the emphasis from its present production of long and flat products to high-grade products and additional products like the deep-drawing, tin-plate and electrical steel sheets etc.

As a matter of fact the dialogues between the PS and the Chinese on this subject were going on for quite sometime. In March 1995, the government had signed a protocol with the Chinese authorities on co-operation for expansion of the PS.

Later, the President of Pakistan during his state visit to China in April 1997 had also proposed to the Chinese President that the two sides should enter into a joint venture for the up-gradation, expansion and management of the PS.

This was followed by exchange of letters between the Chinese minister of metallurgy industry and Pakistan minister for commerce, responding positively towards the proposed joint venture agreement.

Pursuant to this decision all the technical and economic aspects of the expansion of the PS were discussed between the selected Chinese Corporation and the PS.

Consequently a high-level delegation led by the secretary, ministry of industries & production visited China during January 18-25, 1998, with the objective to conclude draft agreement with the Chinese which was to be signed during the visit of the Prime Minister to Beijing.

After extensive and prolonged discussions the delegation had with the Chinese minister of metallurgy industry and chairman/president of the corporation the draft agreement was concluded. The Chinese had finally agreed to offer the most attractive package, financial as well as technical, for executing the expansion plan, on the demand of Pakistan side.

The indigenous design and manufacturing facilities were to be utilised optimally, under technology transfer arrangement, for which the Chinese had signed a separate agreement with the State Engineering Corporation. A large portion of mechanical and electrical/electronic equipment to be supplied would have been of Western/Japanese origin.

This agreement though scheduled for signing along with other agreements during the visit of the prime minister was not signed somehow. No reason was given to the Chinese as to why this item on agenda, which was finalised and agreed to jointly by the two sides, was deleted by the Pakistan side at the last moment.

Thus the nation lost an excellent opportunity, in 1998, to restructure and rehabilitate the PS, and to make it viable, financially and commercially.

The package negotiated with the Chinese was very attractive having met all the requirements of the government of Pakistan, including equity participation and provision of soft term credits. If implemented then, the expansion project would have already been completed by August 2002.

As they say, it is never too late. The implementation of the expansion plan of the PS -whether through the Chinese, the Soviets or a third country— is the proverbial need of the hour.

But it has to be done as envisaged by the experts, that is, seeking latest technology and equity participation from the foreign partner, incorporating the best commercial and financial deal.

Time is of essence however. The nation cannot afford another delay in implementation. This will also revive the national engineering industry, which will be actively engaged in design, production and installation of machinery for expansion project.