The Rs10 billion approved by the Economic Coordination Committee of the Cabinet last week was not a bailout package as generally perceived, but covered the bank guarantees approved mid of last year. The mill needs a major capital injection and a sound business strategy to survive.

It would become clear over the next few days if the government has the political will and the capacity to put things right. It is contemplating to shake-up the current team of executives.

“Pakistan Steel can be turned around if the government so decides. The will of the government would be tested this week when a special committee headed by the PM Gilani meets in Islamabad. A stronger independent management team equipped with the right set of skills can pull it up again”, an insider told this scribe.

You need not be an expert to figure out the collusion of incompetent/inefficient management with the vested interest and corrupt bureaucrats in pushing the mill over the edge. Factors such as government's indifference, political interference in workers appointments, allotment of quotas and award of licences to buyers eroded the financial viability of the mill.

Lack of transparency in procurement of raw material and distribution of production amongst buyers has long been a bane of the company, bringing its credibility under question. Besides, the practice to let the company's executive chairman head the board of directors created a conflict of interest and compromised the capacity of the board to act as a whistle blower, when the situation deteriorated.

The government last week turned down a proposal of the management to inject one-time sizeable capital in PSM, a member of ECC told Dawn in confidence.

The ECC approved Rs10 billion for PSM to meet its need for term-loan facility of Rs8 billion for five years and a running finance facility of Rs2 billion, renewable on yearly basis, in favour of Pakistan Steel based on government guarantee to consortium of banks led by the National Bank.

People working or doing business with PSM are anxious or depressed. The arrest of Moin Aftab Sheikh on the charges of corruption in the PSM rattled officers in the related ministries. Many, when contacted, declined to discuss PSM affairs even informally.

The middle and the lower cadre staff at the mill, however, was not perturbed as they believed that the crisis was cyclical that visited them every three years.

Finance Minister Shaukat Tareen, when contacted in Islamabad over telephone, did not shy away from talking on the issue. Speaking to Dawn he blamed the archaic management practices at Pakistan Steel for the slide. He confirmed that Rs10 billion, the amount approved in the cabinet meeting in the second week of January was not a bailout package.

“They (PSM) approached us in July last year when they could not open L/Cs as their credibility was under public scrutiny. At that point, we decided to help them by persuading commercial banks to form a consortium under National Bank leadership and support them with a loan guaranteed by the governemwnt. The amount approved in the cabinet was basically the guarantee money demanded by lending banks”, he said.

“I am not ready to commit even a dime to mismanaged public companies that have bled public exchequer dry. They will have to restructure and develop a business plan to grab our attention”, Tareen said.

Mir Hazar Khan Bijrani, minister of industries, was optimistic. He felt that people were reading too much in the PSM story. He was confident the government would set things right.

“The mill cannot survive if operated at 35 per cent capacity. The target should be to run it on 90 per cent capacity. We are doing all it takes to achieve that. If it means revamping of the organisation, so it be. The government will do its part by ensuring steady supply source of raw material from Iran or elsewhere. I am hopeful that God willing we will succeed in protecting and promoting national assets,”, Bijrani told this writer from Lahore over phone..

The top tier management of the PSM was not inclined to divulge the details of the financial difficulties and raw material procurement problems with the media for fear of more negative publicity. Officials informally admitted that the situation was precarious and not manageable.

Insiders, however, confided that the absence of buffer stocks of raw material and the inability of the PSM to raise required amount of capital from the financial market has created a situation where blast furnace can stop any day bringing the PSM at a grinding halt. The plant is already operating at 35 per cent capacity.

Chairman, PSM, M M Usmani, explained that all woes of the PSM can not and should not be brushed aside by attributing them to corruption.

“There are issues related to prices, credit availability, government apathy, workers blackmailing etc. I have still not given up hope. We must understand it would be no less than a disaster if blast furnace died down. We will not allow that to happen. We will do all in our power to avoid closure”, he reluctantly commented over telephone.

Experts believe that cumulative loss to the national exchequer and the economy would be immense if PSM closes down.

“The loss from the failure of the PSM will not be limited to over 16000 workers (12000 regular and 4000 contract workers ) who will loose jobs or its 1800 registered customers (steel re-rolling, engineering, construction, traders, etc) who would loose dependable local supplier, it would shake the economy at its seam.

Beside the PSM is perceived as a symbol of the economic strength. Currently when the country is faced with security and politico-economic challenges, a perception of crumbling industrial sector would devastate business sentiments”, said an expert.

“The project needs urgent injection of capital to cover for its vital expenses. It also it needs professional management and operational freedom if the government wants to pull it back from the brink”, a retired PSM officer said.

“If PSM has to survive, top appointments should be handled by a search committee, rather than by politicians. The strategy could be more effective if emoluments were performance-based and the PSM head be made personally accountable for dubious deals”, said a management expert.

General Saeed Qadir, ex-chairman PSM, when approached for comments in Islamabad said “Its pains me when I see the present state of PSM. The project was giving profit a year ago. In my view the following factors led to its decline wrong appointment of CEO, no check on rampant corruption, international recession and decline in the pace of domestic growth”.

“The CEO of PSM was more of a front man who had never managed any mechanical operation in his entire career what to speak of running the country's largest integrated plant. The CEO therefore had nothing to offer to steer this most challenging project infested with all sorts of problems including inefficiency, corruption, dealer mafia, contractors' cartels and above all political interference”, commented General Qadir.

Kahyam Siddiqui, an officer of Tawairqi Steel, and Khalid Khan CEO of Al Abbas Steel, expressed their concern over the state of affairs and said the PSM was a major source of raw material for the steel re-rolling sector in the country.

“What has been done has been done, the blame game should stop and efforts should be focused on saving the PSM”, Khalid said.