While acknowledging that corruption still exists in Pakistan Steel Mills (PSM), the entity's Chief Executive Officer (CEO), Major General Zaheer Ahmed Khan (Retd) sought Rs 8.13 billion in addition to Rs 18.5 billion for up-gradation of country's mega industrial unit. In a detailed presentation to Senate Standing Committee on Industries and Production, he said he would be able to achieve production target of 77 per cent - the breakeven point - by January next year. Mills' fixed monthly expenditure is Rs 1.75 billion.
Khan exaggerated current production statistics and initially informed the committee that production was up to 25-30 percent capacity but later revised it downward to 22 percent. Minister for Industries and Production Ghulam Murtaza Jatoi stated that the PSM has to achieve a production target of 77 percent by December and the CEO PSM acknowledged that PSM is missing its production targets agreed with the Finance Minister.
The CEO requested the standing committee to support the national asset and recommended that the government impose a 10 percent customs duty on private sector to promote a competition. He added that the SRO 656(1) 2006 regarding tax remission for exports should be withdrawn. Smuggling of steel products was also one of his concerns.
In his brief to the Standing Committee, he stated that the PSM is a 40-year-old plant which needs revamping and most importantly 'upgradation' and modernisation to ensure three million tons per year production to make it a financially viable and profitable asset of the nation. The PSM's infrastructure is huge and meant for 3 to 5 mtpy - 1 mtpy was an initial step.
Similar plants (25 or so) installed by the then Soviet Union have been upgraded while PSM is an exception. "Our neighbour Iran has upgraded Esphahan Plant to 3/3.5 mtpy and is poised to upgrade it to '5 million tons per year. They have invited the CEO Pakistan Steel who is planning to take a delegation of senior engineers to see their plant," the CEO revealed.
He urged the government to favourably consider Russia's offer for PSM expansion to 1.5/3.0 mtpy. "This is a golden opportunity as momentous for our 'industrial growth' as is 'Economic corridor' for our national economic growth," he added. Only through growth of Engineering and Manufacturing (and steel being the base) will Pakistan achieve a middle and even a higher economic status and the PSM expansion will act as the catalyst, the CEO stated.
The cost estimates for expansion to 1.5 mtpy and 3.0 mtpy in two phases are US $300.13 million and $899.68 million, respectively - the exact cost will be determined either through a competitive bidding or government-to-government agreement with Russia, China or any other interested country to be completed in 3 to 5 years, Khan said.
It will bolster the engineering goods industry, construction industry and agriculture sector besides reducing dependence on steel imports. It will also result in better utilisation of indigenous mineral resources and generation of massive employment opportunities during construction and operation phases as well as in allied and downstream projects, the CEO concluded.
Senator Sardar Fateh Muhammad Hasni gave tough time to the CEO and said that despite injection of a huge public money the PSM will not be functional until local iron ore is used. He also sought details of incumbent Board of Directors (BoD)) but the CEO sidetracked the issue.
The committee directed Chief Executive Officer, PIDC, Khalid Chadda to give a detailed briefing on PIDC and subsidiary companies. Managing Director Utility Stores Corporation (USC) Khaqan Murtaza requested the Standing Committee to recommend enhancement of subsidy up to Rs 5 billion. The CEO of Export Processing Zone Authority and the Managing Director of HMC could not give briefing due to paucity of time.
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