Govt decides to close Pakistan Steel Mills due to heavy losses

ISLAMABAD: The federal government has decided to shut down Pakistan Steel Mills (PSM), a state-owned enterprise that has been suffering heavy losses for years.

In a statement, the Secretary of Industry and Production said that the Sindh government has been offered 700 acres of PSM’s 19,000-acre land to establish its own steel plant. Last year, the secretary noted that no buyers were found for Pakistan Steel Mills. He added that aside from the 700 acres, the remaining land would be used for industrial purposes.

Chief Financial Officer (CFO) Arif Sheikh stated that the decision to close PSM was due to its poor performance and financial losses.

Established in 1974, the PSM has faced financial difficulties for the past decade. The CFO mentioned that the annual salary bill for PSM employees is Rs3.1 billion, and over the last 10 years, the government has paid Rs32 billion in salaries.

Additionally, the mill has consumed Rs7 billion worth of gas over the past decade, which Arif attributed to ‘politically-influenced recruitment and permanent staffing.’

In 2010, the CFO added, the government decided to regularize the employment of 4,500 employees, which resulted in an additional cost of Rs2 billion.

The Sindh government has now announced plans to establish a new steel plant to replace the old one, according to the Secretary of Industry and Production.

Furthermore, the federal government has decided to allocate 4,000 acres of land from the PSM site for special economic zones.

Previously, the Ministry of Industries and Production directed the PSM authorities to discontinue the gas supply to the steel plant, effectively ending any revival efforts for PSM.

A notification from the Ministry instructed the PSM CEO to halt the gas supply. The circular indicated that gas supply to critical parts of the plant, including blast furnaces, had been severely restricted since June 2015 to prevent complete shutdowns of these essential components.

As of June 30, 2023, PSM had estimated losses of Rs22.4 billion, with gas obligations reaching Rs33.5 billion. The assets of PSM amount to Rs83 billion, and during the fiscal year 2023-24, it faced a loss of Rs6 million per hour due to ongoing financial issues.

It is noteworthy that the foundation of Pakistan Steel was laid by former Prime Minister Zulfikar Ali Bhutto on December 30, 1973. The design of PSM, with a capacity to produce 2.2 million tons of steel, included a 12% shareholding in 2009.