THE operations of Pakistan Machine Tool Factory, a strategic state-owned enterprise, are at a standstill. Thousands of its employees have not been paid their salaries for the last five months.
There are no signs that it would re-commence its activities soon. It seems to be on the verge of collapse. The factory’s power supply was cut-off by the KESC on January 23 due to non-payment of electricity bills amounting to Rs15 million and the PMTF management decided to close plant. Earlier, in November 2011, PMTF had seen another shut down following workers protests, demanding their outstanding payments against salaries and perks. The management is seriously considering to lay-off the employees.
The cash-starved enterprise needs immediately one billion rupees to pay its creditors and procure materials to restore production operations. However, the Letter of Comfort recently issued by the ministry of finance for the purpose of enhancing credit limit has not been accepted by the National Bank of Pakistan. Currently, the company has orders in hand worth Rs1.8 billion but is unable to execute due to its financial constraints.
The PMTF management had asked the government sometime in February 2010 to release necessary funds for its restructuring which included diversification of products. This was not agreed to. Finally, the Cabinet Committee on Restructuring of State-Owned Enterprises (CCOR) approved, on December 4, 2011, the PMTF business plan, recommending enhancement of its credit limit by one billion rupees under the government’s sovereign guarantee. The ministry of finance however has not yet moved to effectively implement these decisions to bailout this vital industrial unit.
The only hi-tech unit of its kind, PMTF produces machine tools, automobile transmission components, die-cast parts, armaments and other engineering goods. It has recently undertaken manufacturing and marketing of advanced CNC turning centre, CNC lathe and CNC milling machine. It has plans to produce wind turbines for power generation.
On the other hand, the PMTF is up for sales under the public private partnership (PPP) mode. Infrastructure Project Development Facility (IPDF), a company of the ministry of finance, has invited Expression of Interest (EOI) from prospective investors by February 17, on “Rehabilitate, Operate and Transfer the Manufacturing Facility” basis. The partnership period may be 20 years.
The proposal envisages rehabilitation of equipment/machinery and their transformation into a modern plant, whereas it is not required. Existing manufacturing facilities at PMTF have been rehabilitated and modernised a number of times through the participation of the Europeans till recently. In fact, what required is addressing its financial rehabilitation and not that of plant machinery.
The IPDF is mandated to facilitate the development of infrastructure projects at the provincial and municipal levels. Under the PPP methodology, privatisation of PMTF is not within its domain. Obviously, all the IPDF ongoing projects relate only to infrastructure like solid waste, road-bypass and others. The PMTF is still on the active list of the Privatisation Commission that had plans to offer 26 per cent shares to private sector, along management control, reducing significantly the government involvement in the SOE as per policy.
Apparently, the IPDF requires an injection of funds by the investor to utilise the available land, infrastructure and machinery.The interested parties will thus be eyeing the 226-acres of prime industrial and commercial land at Landhi owned by the company, which includes 60-acres vacant land earmarked for factory’s expansion.
In recent years, various parties had shown interest in taking over PMTF through proposing fake joint venture arrangements using their political influence. They were not successful in the past, but now that the transfer modality has been formalised with shift in privatisation policy, PMTF is attractive for land grabbers again. The situation has worsened as there is no full time Chairman of State Engineering Corporation, and the ministry of production has seen its third secretary during the last one year.