Pakistan Steel on the way to recovery
The new managerial team led by Brigadier Shujah Hassan Khurazmi (R), CEO, mandated to sort out the badly tangled affairs of the Pakistan Steel Mills (PSM), appears to have devised a way out of the difficulty.
The mode of reviving PSM was painstakingly put in place by the current CEO by breaking-down various parts of the outfit and then addressing them one by one.
The success of the effort could be gauged by the fact that the cabinet committee on Privatisation approved the issuance of Scheme of Arrangement (SOA) by the Privatisation Commission (PC) for the revival of PSM. The approval has now paved the way for PC to file the SOA with the Securities and Exchange Commission of Pakistan including updated financial reports of the PSM and its subsidiary, approved by the Privatisation Com¬mission Board for transferring the utility connections to the newly formed subsidiary without encumbrances, approval for the retention of the new subsidiary either by the government of Pakistan or PSM and the desired size of divestment among others.
In this context, the cabinet committee has already approved the transferring of ‘Identified Core Ope-rating Assets’ into wholly-owned subsidiary of PSM through the scheme of arrangement as provided in the Companies Act of 2017, followed by the sale of majority shares of the newly-formed subsidiary (without transferring of full ownership) to strategic private sector partner.
The committee examined the substantive arguments for proceeding further with reference to the transaction structure for revival of PSMC. It may be recalled that for the revival of PSMC, the transaction structure was approved in December 2020, according to which a subsidiary was to be formed for transferring the identified assets and subsequent sale of majority shares of the newly formed subsidiary without transferring the ownership.
As mentioned earlier, CEO, PSM prepared a revival plan and assiduously worked on it to become workable. It is worthwhile to mention that all efforts undertaken by the PSM were paid for by PSM’s own generated funds. It was mentioned that since 20 August 2020 to 10 August 2021, from Own Generated Funds of Rs. 5,062 million, PSM has utilised Rs.4,314 million with balance as Rs.748 million. PSM had stopped paying EOBI contribution in March 2015 and Rs.580 million were outstanding till October 2020 and PSM paid Rs.609.31 million up to 30 June 2021.
Moreover, PSM had not paid premium of Group Insurance and 92 families of deceased employees were affected but PSM ameliorated the situation by paying the outstanding dues. It was also taken care to make payment of salaries to teachers that had not been paid for seven months.
Huge financial burden was added on PSM due to subsidies granted to its employees as per COD 2012 (once PSM was operational) and in this context the new management is trying to find viable solution to resolve issues with KW&SB, KE & SSGC to reduce the losses.
Efforts are also being made to improve standard of education and improving neglected buildings that were badly neglected over the past two decades PSM had to pay dues to its ex-employees under SHC Orders which were not paid since June 2015 making PSM to pay Rs.42.06 million. Moreover, PSM after deducting premium from salaries did not pay to the companies but the new management paid Rs.7.6 million as amount of premium to over 1,100 employees.
PSM paid huge amounts to ferry its employees (even after PSM’s closure in June 2015). The bills of outstanding amount reached Rs.11.18 million forcing PSM to stop this practice on 20 August 2020 and used its own worn out buses yet facing defamation paid Rs.11.06 million to transport contractors.
The new management worked hard to take care of the neglected Steel Town assets including school and colleges, accommodation, guest house, officers mess , Mosques, Imam Bargah, Church and Mandirs. PSM also used its own funds to improve Madar-e-Millat College of Education & ICS, Agosh Special Children School, Madar-e-Millat Degree College, partial repair in AIGSS & SLBSS, sewerage lines in Steel Town, transport, machinery, security apparatus, medical services, hospital and medical equipment, paying bills of private hospitals and doctors, Quaid-e-Azam Park & cleaning Badal Nullah, established Covid-19 Vaccine Centre, alternative electric supply line and installation of electric meters at houses in Steel Town.
In Gulshan-e-Hadeed Phase even after having received land cost and development charges from the employees it was neither developed nor possession of the plots given to the allottees. A number
of plots also got encroached as PSM had no capacity to develop. Under new management, PSM started giving possession of plots to allottees.
Management reclaimed over 700 plots from encroached plots and is making efforts to vacate remaining 176 plots for which case is pending in the court.
An amount of $14.872 million for supply of iron ore had not been paid by PSM since 2008. Case had already been won by ICIOC so PSM has paid over $2 million (Rs.308.63 Million) for one shipment while payment of remaining shipments is outstanding.
A number of local creditors required to be paid and three creditors namely Al Hamza, Siddiq Sons
and Bismillah Metal Impex have outstanding dues against PSM of approximately Rs.970 million out of which the new management has paid Rs.211.09 million.
Efforts are in hand to clear all of their outstanding dues at the earliest. Rs.45 million were to be paid to Siddiq Sons & Traders as the amount for the purchases by employees had been deducted from their salaries but not paid to the supplier in the past and in this respect PSM has so far paid Rs.42.01.
Another Rs.14.84 million have been paid to NEPRA & PNRA and the dues have been cleared up to 30 June 2021. Since PSM could not arrange funds from GoP for its retired employees and its non- payment could have initiated litigation against PSM and GoP, therefore, as partial payment of their dues Rs.619.3
million have been paid to these retirees.
Rs.17.751 million have been paid to families of the deceased employees of PSM in addition to advance payment to serving employees against their final dues of Rs.356.88 million are paid to help them address their urgent needs as a welfare measure.
Improvement in Bulk Water Supply System and its repair at Gharo Pumping Station has been undertaken
and relaying of new electric conductors over 23 poles by KE is ongoing to improve water supply to 110 MG Reservoir. Repairing the leakages on Water Supply Line and Water Supply Line from 110 MG Reservoir is undergoing to save wastage of water.
To ensure transparency in financial matters of PSM Brigadier Shujah Hassan Khurazmi (R), CEO, constituted a Payables Committee to ensure that own generated funds are best utilised and PSM liabilities are paid off.
Recovery of outstanding dues from M/s NIP under guidance of PSM Board of Directors is underway and cost of land with M/s NIP had been finalised providing recovery of Rs.1,035 Million from M/s NIP. Resource mobilisation revised rent policies have been introduced whereby houses are given to the
retired, retrenched, other interested people on market rate to generate income for maintenance work in Steel Town.
The new management retrenched 5,492 employees as part of its revival plan but faced Dharna with CEO PSM being forced to stay inside his house for over a month in January 2020.
Though law and order situation remained disturbed it was, however, handled and ended without use of force or damage to property or life of PSM and its serving employees. PSM Management under the able guidance of Brigadier Shujah (R) established its writ which had eroded due to non existence of permanent CEO.
He has proved to be the right man for the right job and it is expected that he will continue to take the task to its fruition and will be provided opportunity to see the rejuvenation of this national institution.
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