PSM sell-off process reinitiated

Privatisation Commission is reportedly in the process of formalising Pakistan Steel Mills (PSM) transaction structure prior to taking its approval from the Cabinet Committee of Privatisation (CCoP). Sources claimed that the federal government made a serious effort to implement CCoP decision of 2 October 2015 to hand over PSM to the Sindh government; however, without any serious interest by the provincial government the matter was once again taken up by CCoP in July 2016.
After detailed deliberations, and review of the complete correspondence between Privatization Commission and government of Sindh, CCoP decided to withdraw its offer of October 2, 2015 and authorized the PC to proceed with the planned privatization of PSM.
The Privatisation Commission in accordance with CCoP decision advised the Financial Advisor to proceed as per the Financial Advisory Services Agreement (FASA) and reinitiate the privatisation process of PSM. At present, the Transaction Structure is being formalised and will be placed for consideration and approval of the CCoP shortly. Sources added that (FASA) was signed with the Financial Advisor on June 1, 2015 and the draft due diligence report was submitted to PC on August 17, 2015.
After completing the required formalities of Transaction Committee meeting and their comments and observations the FA was asked to proceed with the formulation of an optimum transaction structure based on the due diligence exercise. The proposed transaction structure was to "split PSM and transfer all land and excess liabilities to government with core land to be provided to PSM under a long-term lease agreement". Privatization Commission stated that it was weighing the options of giving the PSM on lease either to Chinese or Iranian companies because no party had evinced any interest to purchase PSM.
The first offer was made by the Privatization Commission to the Sindh government on October 14, 2015 followed by two reminders - on November 4 and December 3, 2015. A final letter was issued on December 15, 2015 wherein the government of Sindh was requested to make its final decision by December 31, 2015, failing which the federal government will proceed with the planned privatisation of PSM.
The government of Sindh responded on January 4, 2016, seeking: (a) balance sheet of PSM for last five years; (b) financial statements of PSM for the last five years; (iii) a detailed list of assets of PSM;(d) any Transaction Structure developed by the government for PSM's privatisation highlighting the government of Pakistan's commitment to make this transaction viable for the buyer;(e) any strategy paper revealing in detail the nature of intervention government intends to carry out for making this deal acceptable for the buyer; (f) any tax policy which is envisaged to make the revival of the PSM attractive for the buyer; (g) any plan of the government for revival of operations of PSM; and (h) approval of the CCI (Council of Common Interests).
The Sindh government was provided all the "desired information" on January 7, 2016 with a request that provincial government may kindly convey its final decision by January 21, 2016. On January 8 2016, the Privatisation Commission received a reply from the government of Sindh wherein it was conveyed that the government of Sindh is not in a position to convey its response by January 21, 2015, as it would take a longer period of time to review / analyse the aforementioned documents and other steps for due diligence.
On February 9, 2016 the Sindh government sought some more information which was provided. On March 17, 2016 the PC sent a letter to the Sindh government offering the Sindh government all assets of PSM, including additional land of approximately 14000 acres, over and above the core land required to run PSM, which in itself was an incentive for the government of Sindh. Additionally, the Sindh government was also assured that once it takes over the PSM and clears its current liability towards SSGCL, the gas supply would be immediately restored but no response was received from the Sindh government and the federal government has now decided to reinitiate the process.