Steel Mills At Standstill

　　Having added Rs53 billion losses toits stock of Rs258bn debt and liabilities in 16 months, Pakistan Steel Millshas remained shut for three weeks and there are no signs of its immediaterevival.

　　This is for the first time since itsestablishment three decades ago that “the mother of all industries” has come toa complete halt mainly because of poor maintenance and repairs as required bystandard operating procedures and operational manuals despite internalwarnings.

　　The federal government is yet toorder an inquiry into the matter, although the PSM management, while securingRs18.5bn budget support, had promised in April to achieve 50 per cent capacityutilisation in October and earn a profit of about Rs250 million in January nextyear with 77pc capacity utilisation.

　　In October, the plant could produceonly 1870 tons of iron and steel against its daily capacity of 91,667 tons.This comes at a time when the government has sought applications forappointment of financial advisers for PSM’s privatisation.

　　Senior government officials said thecountry’s largest industrial complex had been closed down on Oct 8 after hotmetal stopped because of a hole having developed in one of its two converters.An emergency was declared on the day when iron notch of blast furnace No 1’scooler burst and the hot metal spread. The converter had been under maintenancesince early this year.

　　The officials said the PSMmanagement had taken a few days to clean the plant and repair the damaged partsbut failed to resume production. The plant is unlikely to resume operationssoon.

　　Informed sources said the plantfaced a technical fault because it was not being run as envisaged in theoperational manual and the quality and quantity of the blast furnace and otherinput materials were not aligned to the machine design, affecting itsproduction cycle rhythm and sustainability.

　　Given the fact that steel plants arerun 24 hours for 365 days on 1600-1800 degree Celsius, any unplanned shutdownhas serious consequences. Under similar circumstances, blast furnace No 2 ofthe plant had collapsed 14 months ago.

　　At risk are foreign exchangeexpenditures, balance of payments and non-utilisation of human resources,thereby strengthening monopoly of the private sector.

　　Instead of a metallurgical engineeror a business expert, mechanical engineer retired Maj Gen Zaheer Ahmed Khan wasappointed Managing Director of PSM by the PML-N government in April to turnaround the mills with a Rs18.5bn budget support. But PSM has added Rs53bn toits stock of debt and liabilities since June last year and about Rs18bn sincethe new manager took over early this year.

　　Mr Zaheer had promised 20pc capacityutilisation in July, but it stood at 7pc. The capacity utilisation stood at11pc against a promise of 30pc in August and 21pc in September against thetarget of 40pc. Production flattened to a maximum of 1871 tons in Octoberagainst the target of 46,000 tons (50pc capacity utilisation).

　　According to the sources, the MD hasnow sought another budget support of Rs8bn.

　　Interestingly, the PML-N governmenthas informed the International Monetary Fund that PSM had suffered financialproblems because of the 2008 global recession and that it had appointed aprofessional board of directors for its turnaround and subsequent sale.

　　But a cursory look at the boardreveals that most of its members are government servants or belonging tostate-owned companies.

　　“The present state of PSM was due tounchecked corruption, inefficiency, over-employment and government’s lukewarmattitude towards its revival,” former industries and production secretaryShafqat Naghmi reported in a summary sent to the Public Accounts Committee(PAC) of the National Assembly.

　　He said the problem started in2008-09 when PSM had suffered Rs26.45bn operating losses.

　　The losses kept on increasing as4,732 temporary and about 300 daily-wagers were regularised with backdatedbenefits from July 2010, despite strong opposition by the ministries of financeand industries and production.

　　The man responsible for the en massregularisation was sacked on the orders of the PAC, reportedly because of hisfake degree.

　　During the hearing of a suo motucase, the Supreme Court had ordered registration of cases against corruptofficials. The Federal Investigation Agency registered 10 corruption caseswhile a forensic audit of the production and sale and purchase deals wasrejected by the PSM board when incumbent Finance Minister Ishaq Dar waschairman of the Senate standing committee on industries and production.

　　As a consequence, former primeminister Yousuf Raza Gilani had sacked the then PSM chief on corruptioncharges, but the FIA failed to make any recovery.

　　The Supreme Court had transferredthe investigation to the National Accountability Bureau in May 2012 and directedit to complete the inquiry in three months. The case has been pending beforethe court and the NAB investigation is yet to produce any conclusive result.