Subsidiary to be set up to lease PSM, court told

Published February 10, 2021
A general view of the deserted hot strip mill department of the Pakistan Steel Mills .— Reuters/File
A general view of the deserted hot strip mill department of the Pakistan Steel Mills .— Reuters/File

ISLAMABAD: The Supreme Court was told on Tuesday that a subsidiary or a special purpose vehicle (SPV) of the Pakistan Steel Mills (PSM) is likely to be set up by the end of this month that would take away the whopping liability of about Rs450 billion to make the bleeding mill free of all encumbrances.

This initiative would help attracting the strategic private investor to get the much- needed capital investment and thus revive the existing PSM plant to its production capacity of 1.1 million tonnes per year that will be enhanced gradually to 3m tonnes per year by bringing efficient modern technology besides creating job opportunities for professional and skilled manpower, the SC was told.

The ambitious plan was presented by federal Privatisation Minister Mohammadmian Soomro before a three-judge bench, headed by Chief Justice of Pakistan Gulzar Ahmed, that had taken up a case relating to the fate of the PSM.

SC appoints conciliator to work out arrangement for settlement between management and workers’ unions

The chief justice regretted that Indus­tries Secretary Afzal Latif and Priva­tisation Secretary Hasan Nasir Jamy were not forthcoming in sharing information about revival of the steel mill.

The chief justice wondered why not the daily expenditure of Rs20m be recovered from the secretaries, also regretting that none of the secretaries was well versed even about the PSM’s downstream projects when they were preparing to sell off the mills.

A huge sum of government funds was being drained and going in the air for the last many years but since the money did not belong to the secretaries they were not bothered, the chief justice deplored.

Mr Soomro explained that the SVP scheme had been designed in the absence of working and the government was negotiating with several interested parties from China, Korea and Russia etc.

When the chief justice recalled the 2,006 apex court judgement against privatisation of the PSM, Planning and Development Minister Asad Umar conceded that the judgement was in the field and to avoid violation of the verdict the SPV was being created and the PSM was being leased through competitive bidding.

Advocate Shahid Amjad Bajwa informed the court that according to experts, $500m was needed to revive the mills to its original production capacity of 1.1m tons per annum, $750m to enhance it to 2m tons and $900m to $1 billion to further increase the capacity to 3m tons per annum.

Justice Ijaz-ul-Ahsan, a member of the bench, regretted that for the last many years the state enterprise was on government grants and thus bleeding the economy and as the time passed, it added to the losses of the mill.

“We used to manufacture ships and now are ordering foreign countries to build the same for us despite the fact that we have all the facilities available in the country,” the chief justice deplored, adding that if the situation persisted, the entire land of the PSM would be sold and the machinery scrapped thus depriving the country of its assets.

When the PSM was not earning a penny for years, why it was keeping its workers and why its chairman was roaming around abroad, the chief justice wondered.

“Since we are at the receiving end and at the disadvantaged position, the investor may dictate its own terms during negotiations,” he feared.

The chief justice was worried that the negotiations on the steels mill might end up in international arbitration like in many other cases.

He was also bitter that all state enterprises, including the Heavy Mechanical Complex, Karachi Shipyard and PIA, were shutting down one by one.

The Supreme Court appointed senior counsel Rashid A. Razvi as a conciliator to work out a workable arrangement for the settlement between the management and different workers’ unions of the PSM regarding layoff plans when the mill was shut. The plan will be placed before the court in two weeks.

Meanwhile in its report, the PSM stated that the Privatisation Commission planned to undertake pre-qualification of investors, who would submit the interest in response to the expression of interest and statements of qualification, and then invite pre-qualified interested parties.

The commission envisaged, the report said, to conduct bidding for the SPV in the third quarter of 2,021 and the financial closure and commencement of the business would depend on timelines agreed to with successful bidder in the share purchase agreement.

Under the approved transaction structure by the Cabinet Committee on Privatisation, the core operating assets — including the PSM plant and machinery namely coke oven and by-product, sintering plant, iron making department, steel making plant, cold rolling mills, galvanising plant, cold formed section, refractory plant and oxygen plant besides power generation plant and 1,268 acres of land comprising only seven per cent of the total PSM land area of over 19,000 acres — would be leased out to the newly formed SPV, the report said.

Published in Dawn, February 10th, 2021

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