AFTER years of uncertainty and inde- cision, the future of Pakistan Steel Mills (PSM) may finally be taking shape. On May 30, Pakistan and Russia signed an agreement to establish a new steel plant at the site of the defunct PSM in Karachi. The project, estimated at $2.6 billion, is to be commissioned within two years, and will occupy 700 acres of the 1,675-acre existing steel complex. A joint working group has been formed to oversee its development and implementation.

In a parallel move, the government has begun winding down the old entity. The services of another 1,350 PSM employees were terminated recently, and plans have been announced to offset liabilities of Rs345 billion by selling PSM’s remaining assets. While this marks a decisive shift, it also draws a painful line under decades of decline.

As a symbol of national industrial ambition, PSM was established in the 1970s with the support of the erstwhile Soviet Union. It was envisioned as a cornerstone of Pakistan’s industrial infrastructure, providing self-sufficiency in steel and supporting countless down-stream industries. For a time, it fulfilled that promise.

However, beginning in the early 2000s, the trajectory reversed. Successive governments failed to revamp or privatise PSM effectively. In 2005-06, a consortium offered $362 million to buy PSM, but the deal was blocked by the Supreme Court over concerns of serious undervaluation — allegedly under political pressure. The Supreme Court’s decision triggered a long period of stagnation, financial losses and operational decay.

By 2015, production had completely ceased, but the government continued to delay a final decision. In July 2023, the federal government formally announced its closure and dismantling. Yet, the following year, a new board of directors and a chief executive officer (CEO) were appointed apparently to manage the wind-up. However, the move only added to the confusion. In September 2024, a Russian delegation reignited hopes by proposing a new steel plant at the same site.

Throughout 2024 and early 2025, con-flicting messages emerged. Federal and Sindh governments debated the revival or replacement of the mill. The federal government offered 700 acres of PSM land to Sindh for industrial re-development, but later rolled back the initiative by confirming a partnership with Russia to build a new plant on the same land. This lack of coordination highlighted the absence of a consistent national strategy.

The proposed new steel plant with Russian collaboration promises to incor-porate advanced technologies. In recent years, Russian steel manufacturing has evolved significantly, embracing energy efficiency, automation and modern production methods aligned with global standards. If successfully implemented, the project could well mark a new era for Pakistan’s steel sector. The strategic importance of domestic steel production cannot be overstated. Pakistan currently faces a demand-supply gap of over three million tonnes, and imports iron and steel worth $2.7 billion annually.

A technologically advanced, locally operated steel facility could help narrow this vital gap, reduce import dependence, and support broader industrial growth.

Hussain Ahmad Siddiqui
Islamabad

Published in Dawn, June 20th, 2025