ISLMABAD: Pakistan Steel Mills Corporation Stakeholders Group (PSMC-SG) has strongly opposed government's move to sell valuable assets of Pakistan's largest industrial enterprise by making a subsidiary company Steel Corp Private Ltd and offering its majority stake (51% to 74%) with management control to private investors through the Privatisation Commission.
The PSMC-SG has termed the process as non-transparent and demanded an investigation against those responsible. In this regard, Convener Stakeholders Group Mumrez Khan sent a letter to Prime Minister Imran Khan on September 14, 2021, which has reportedly not been given any weightage by the concerned authorities, so far.
According to the Stakeholders Group, the recent privatisation process of the mills has several legal flaws and irregularities similar to the 2006 privatisation scandal of the Steel Mills.
The Supreme Court in its landmark judgment in the context of CP-9/2006 filed by Watan Party had not only annulled the privatisation process but it also pointed out a number of legal and other irregularities that proved the non-transparency of the plan. Some of these include, not seeking approval from the Council of Common Interest (CCI), not including the value of the land in the mill estimates, and not accurately estimating the value of plant, machinery, and other inventories.
The Stakeholders Group has claimed that all of the irregularities are also present in the recently proposed and in-process privatisation process of 2021. The present government has not yet sought the approval for privatisation of PMS from the CCI as per constitutional requirement because the Sindh government is opposing the privatisation process in which all employees of the corporation are being forcibly retrenched.
The land of steel mills has not been independently estimated in 2020-2021 while the value of industrial land in Port Qasim Town has reached Rs 70 million to Rs 90 million per acre. The non-inclusion of the value of 1229 acres of plant land given to Steel Corp Pvt. Ltd. in its assets is a clear irregularity while the value of this land is estimated to be ranging from Rs. 90 to Rs 110 billion.
According to the SG, out of PSMC's total assets of Rs 560 billion, assets of Rs 134 billion have been transferred to Steel Corp Private Limited for privatisation process. For valuation of these assets, instead of selecting a steel sector valuation specialist through an international tender, a local insurance valuation firm, M/s Joseph Lobo Pvt. Ltd. was selected, for which stakeholders' group is having immense reservations.
According to the group, this company (JLPL) has valued the PMS plant and machineries worth only Rs 98.2 billion, the factory buildings worth Rs 31.4 billion, and the rail, road and bridges in the steel mills worth Rs 1.1 billion, while gas and power installations are valued at Rs. 927 million, water and sewerage systems are valued at Rs. 368 million and parts and tools in stores are valued at only Rs. 983 million, which is much less than their current actual fair market value. The group estimates that more than this can be obtained if the plant, machinery and infrastructure of the steel mills are sold at scrap prices, while it is a plant with an annual production capacity of 1.1 million tonnes per annum which is easily expandable to 3 million tonnes per annum as per original design.
According to the Stakeholders Group, most astonishingly in order to benefit the prospective buyer (investor), out of the total liabilities of Rs. 308 billion payables by Steel Mills Corporation till December 31, 2020, only Rs. 38.2 billion has been transferred to subsidiary company Steel Corp in respect of deferred tax liability, while the payments of Rs. 270 billion will remain the responsibility of the corporation.
Meanwhile, the outstanding payments to thousands of forcibly retrenched employees and billions of rupees payable to domestic and foreign suppliers are still pending. Thus, all these payments will remain the responsibility of the Government of Pakistan and PSMC while the prospective buyer will be able to take control of the plant and the machinery without huge liabilities and will become the owner of a profitable business of steel manufacturing. The group called this Privatisation Commission's move a "serious joke" with the nation and taxpayers.
According to the group, the rehabilitation of steel mills is possible with state-owned resources and technical manpower and there is no justification for its privatisation.
The Stakeholders Group has also expressed serious concerns over the recently amended National Accountability Ordinance issued by the government, which provides immunity to the decisions of the ECC and the Federal Cabinet from NAB proceedings.
Copyright Business Recorder, 2021
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