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Print Print 2023-04-03

Only 1 company interested in beleaguered PSM

  • Ministry of Industries and Production is endeavouring to resolve the longstanding issue of receivables and payables between Sui Southern Gas Company Limited and Pakistan Steel Mills
Published April 3, 2023

ISLAMABAD: The Privatisation Commission (PC) is said to have put privatisation process of Pakistan Steel Mills (PSM) on the back burner as no potential investor is interested in it except a Chinese company, well informed sources told Business Recorder.

Ministry of Industries and Production (MoI&P), sources said it is endeavouring to resolve the longstanding issue of receivables and payables between Sui Southern Gas Company Limited (SSGCL) and PSM.

Recently, a team of MoI&P visited Karachi and held meeting with the concerned authorities to find out any amicable solution of disputed amount.

PSM privatization: PM grills PC for its failure to satisfy potential buyers

Pakistan Steel has three large institutional creditors - SSGCL, Government of Pakistan and National Bank of Pakistan. All three creditors, including the Government of Pakistan are booking mark up on this debt at considerably high rates.

Consequently, these debts are adding up to Rs20 billion approximately every year in interest charges to the losses of PSM which is close to 70% of the total annual losses of the corporation.

Insiders are of the view that even after the passage of so many years since the Mills closed down in 2015, these liabilities remain unresolved. Various initiatives to arrive at a negotiated settlement with creditors have been made, but to no avail.

“Attempts were made to reduce the burden of the interest ranging from writing off of all interest to at least freezing it from the date the Mills were closed in 2015,” the insiders said adding that as is customary in the case of distressed entities, creditors are expected to compromise on interest and or principal amounts particularly if both creditor and debtor are majority government owned entities.

PSM now owes the GoP Rs.102 billion in principal and Rs.48 billion in interests. National Bank of Pakistan is owed Rs.38 billion in principal and Rs.38 billion in interest where as SSGCL is owed Rs.23 billion principal and a disputed amount of LPS on this amount.

SSGCL is asking for Rs 40 billion LPS on base amount of Rs 23 billion.

An official who is associated with PSM affairs told this scribe that Pakistan Steel is probably not an isolated case. Liabilities of all entities under the government’s purview might need a review and the creation of a legal and financial mechanism to address them, as they don’t automatically go away, and allowing them to grow unchecked will make most entities insolvent.

“Individual government departments remain reluctant to accept this responsibility and tend to lean towards obtaining just No Objection Certificates (NOCs) to green light corporate actions, rather than settling the underlying liabilities,” he added.

The official proposed that Privatisation Act be amended to include effective liability settlement as a responsibility of the Privatization Commission for entities on the Privatization List, adding that for settlement with creditors, the latter should not be allowed to block the revival/ privatisation process or extract unfair terms.

For all others companies, the Government should assign legal responsibility to individual administrating Ministries to manage and restructure the entities and their liabilities to ensure their financial well-being,“ he continued.

The official further stated that LPS issue can be solved by the Federal Government by producing a well thought out policy on Debt/LPS between State Owned Entities (SOEs) while considering financial impacts, fairness and practicality.

Talking about privatisation process of PSM, he said that from the lack of progress on bidding by the Privatisation Commission, apparent weak investor response and recent committee discussions, it appears that the privatisation process may have stalled as the number of qualified and interested parties is less than the minimum needed for a competitive bidding process to take place. There has been very little meaningful progress on the bidding process during the last two years.

The ongoing economic situation in Pakistan and the exacerbating balance of payment’s crisis is also discouraging private parties, who were relying on repatriating profits in dollars and also planning on importing much of the raw materials required for steel production instead of exploiting local sources of iron ore.

Hundreds of people in various government departments and PSM have worked hard to support the privatisation process during the last four years.

A number of useful steps have been accomplished that have reduced losses and prepared the entity for investment. However, with every passing day, losses accumulate and the cost of missed opportunity escalates.

“Outright sell-off is not the only method available to revive the Mills. There are other options worth exploring to source private capital, private operations and technical expertise that are necessary to revive Pakistan Steel.

A stage wise and phased revival of the plant using a combination of local and foreign resources with maximum usage of local raw materials might be worth looking at,“ the official suggested.

Copyright Business Recorder, 2023


Comments are closed.

John Apr 03, 2023 06:58am
Some body is trying to pocket billions by disposing PSM...selling all the land and the mines for pennies!
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Haroon Apr 03, 2023 07:13am
I hope they don't revive PSM. Sell it off immediately. We don't trust the government to run any organization honestly and sustainably. Any attempts to revive Steel Mills will lead to further losses down the line.
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Abdullah Apr 03, 2023 10:03am
@John, no one is trying to pocket billions.At time of musharraf it was close to be sold but unfortunately the than chief justic chaudhary interfered and stopped the deal as a result of there interference this has become an entity no one wants to buy.
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Imrana Javed Apr 03, 2023 11:22am
میرا گہر والا بھت غریب ھے ھمارے گھر میں راشن اور آٹا نھیں ھے مھربانی کرکے ھماری مدد کریں میرے چار بچے اور ایک بچی ھے مھربانی کرکے ھماری مدد کریں
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Aamir Latif Apr 03, 2023 11:56am
Resolution ofiabilities should be sorted out, freezing interests since 2015 seems a good way out. Lenders need to agree or will get nothing as interest numbers currently very high will rise further and becomes insolvent. It's time to move as massive investment required to upgrade PSM too as its process and system has become obsolete anyway.... Other way out is sell like PECO like zero, land grabbed, and will be another sad story of Pakistan major industry going in oblivion.
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usman Apr 03, 2023 11:57am
@Abdullah, no just PSM but all State Enterprises should be Privatized and Deregulize.
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Muhammed Apr 03, 2023 11:59am
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Azaree Apr 03, 2023 12:37pm
@Abdullah, Musharraf's PM wanted to sell for pennies to a party who would give him huge commission! Hence SC interfered!
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Azaree Apr 03, 2023 12:38pm
@Muhammed , and all people are dying to secure a sack of flour!
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Aamir Latif Apr 03, 2023 07:36pm
SC should stop interferences in such adventures, last three has extreme negative consequences and nobody is interested.. SC should instead focus in lakha of pending cases and GoP work on privatization as these sadly enterprises have become bleeders
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SAMIR SARDANA Apr 03, 2023 08:13pm
AS I SAID ON " AT JUN 25, 2022 07:00PM "the Chinese will buy the PSM based on the Assets Value & the Economic Potential. Hence,the massive interest & gas dues.they will NOT pay.So these dues will need to be waived or converted into Equity or Preference Capital." ONLY THE CHINESE CAN BUY OUT PSM AFTER THE UNDERSTATED RESTRUCTURING GOP can hive off the Qaid E Azam Park,Fruit Orchard,Hospital etc., to a separate company - with the staff - & offload it to some Pakistan entity on BOO or BOOT basis GOP has to take care of the Salary arrears,Gas dues,K-Electric dues .... & a Chinese investor,will NOT invest in PSM,unless these dues are taken out THE CHINESE HAVE TO BE ALLOWED A CAPTIVE POWER PLANT (WITH COAL) ,AND WITH UNRESTRICTED IMPORTS ON LCS OF MATERIALS,BAO STEEL IS THE ONLY COMPANY, WHICH CAN RUN PSM BAO HAS THE BALANCE SHEET,AND TECHNICAL AND MANAGEMENT EXPERTISE ! STEEL AND METALS ARE NOW ENTERING INTO AN UPSWING ! SAMIR SARDANA
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Patwari Apr 03, 2023 09:01pm
Give PSM to Army, They will revive it and make it profitable with their professional team
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Najeeb Sadiq Apr 04, 2023 01:13am
Why can't we take the rational and prudent economic decisions.PSM was established initial by the Russians so why not to hand over the entity to them for it's rehabilitation and making it financially viable.We can't do it because we neither have the capability nor technology to manage and run it anyway.
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M. M. Amin Apr 04, 2023 09:39am
PSM has been looted and is now a festering wound , getting worse as time roils on. Is the PC alone responsible or the ones who lack courage to make a decision?
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Ababilkhn Apr 04, 2023 09:39am
looong looongg standing problem of this national lifeline proj not resolved in decades by the incompetent rulers.sad sad
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Muhammad Amin Apr 05, 2023 01:39am
Mr. Iftikhar choudry is responsible for this national loss.
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Naseer Apr 05, 2023 07:21am
this was a done deal sabotaged on purpose by current government. previous chairman privatisation had negotiated a novel lease structure with world's largest steel manufacturer with an estimated 2 billion dollars foreign direct investment and no loss of jobs. this was not agreeable with new powers that be.
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Mubashir Munir Apr 05, 2023 03:40pm
Why government is not paying SSGC payment to clear PSM debt the government should sell PSM immediately
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Tulukan Mairandi Apr 05, 2023 05:56pm
Iron brother China is always there for us.
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