Convener PSMC Stakeholders Group appeals for review to revive PSM

Convener PSMC Stakeholders Group appeals for review to revive Pakistan Steel Mils 

This ‘process’ of PSM revival through Privatization/Public Private Partnership is non-transparent due to various reasons.

The transaction adviser should have been appointed in accordance with international law and just one qualified company

We understand that PSM non-professional BOD and controversial Management submitted misleading information and incorrect financial data to PC, ECC, Cabinet and Courts of Law.

It is requested to review the ‘process’ to stop further financial bleeding of PSM, initiated by the MOI&P/Government’s ill-planned and unworkable roadmap proposed by Mr. Abdul Razk Dawood.

KARACHI ( Web News )

The Convener, PSMC Stakeholders Group Mumrez Khan has appealed for review to revive PSM through Privatization/Public Private Partnership terming it as non-transparent & leading to further financial disaster.

PSMC Stakeholders Group previous  has written a letter to Muhammad Mian Soomro, Minister, Privatization Division,Chairman, Privatization Commission,

Ministry of Privatization, Makhdoom Khusro Bukhtiar,Federal Minister for Industries & Production, Hassan Nasir Jamy,The Secretary,

Privatization Division/Privatization Commission, Kamran Ali Afzal,

Federal Secretary,Ministry of Industries & Production.

Giving the reference of previous correspondence, letter PSMC Stakeholders Group through this Reminder, feel its responsibility to record protest prior to invitation of Expression of Interest (EOI) for Pakistan Steel Mills (PSM) revival. Reported Sabah News

As reported in the national press, the Board of Privatization Commission (PC) in its meeting held on 26-7-2021 has approved the transaction structure for privatization of PSM and also approved Steel Corp Pvt Ltd as the new subsidiary that will take over the core assets to be subsequently sold to the bidders. Reportedly, PC shall invite Expression of Interest (EOI) from interested parties after filing of Scheme of arrangements by PSMC with SECP. There are also reports in the media that assets of PSM like plant, machinery, buildings, infrastructures and land of the Corporation has not been valued correctly and transparently by the valuator company selected, which is having no international experience of valuation on integrated steel plants.

This ‘process’ of PSM revival through Privatization/Public Private Partnership is non-transparent due to various reasons. PTI Government adopted roadmap is flawed, violation of rules & regulations. The process of PSM privatization was not approved by Council of Common Interest (CCI) as per legal and constitutional requirement. The controlling Ministry of Industries & Production (MOI&P) has not investigated, “Factors Leading to PSM Losses from 2005 to 2021” to justify the process as yet.  In this regard, PSM BOD/Management/MOI&P/PC have not taken into confidence the Stakeholders.

PSM ill-planned privatization was challenged by Watan Party vide CP 9 of 2006, and letter of acceptance was challenged by Peoples Workers Union in High Court of Sindh. PSM ill-planned privatization by the then government was annulled by Supreme Court, observing (While exercising the power of judicial review, it is not the function of this Court, ordinarily, to interfere in the policy making domain of the Executive which in the instant case is relatable to the privatization of State-owned projects as it has its own merits reflected in the economic indicators. However, the process of privatization of Pakistan Steel Mills Corporation stands vitiated by acts of omissions and commissions on the part of certain State functionaries reflecting violation of mandatory provisions of law and the rules framed there-under which adversely affected the decisions qua prequalification of a member of the successful consortium (Mr. Arif Habib), valuation of the project and the final terms offered to the successful consortium which were not in accord with the initial public offering given through advertisement. For the foregoing reasons, the Letter of Acceptance (LOA) dated 31st March, 2006 and Share Purchase Agreement dated 24 April, 2006 are declared as void and of no legal effect) on 23rd June 2006. What were the hurdles in PSM privatization and its cost (from 2005 to 2021) negatively impacted to national exchequer in a period of 16 years?


Privatization Commission and Arif Habib Group filed review petitions in September 2006. PC withdrew its review petitions in 2012-13 and M/s Arif Habib Review petition was disposed-off by the Court in July 2013. M/s Arif Habib Group review petition was restored by Court in March 2018 which is still pending after passage of more than 15 years.  How PC can process the privatization of PSM prior to disposal of M/s Arif Habib Group review petition?

This ‘process’ negatively cost to country economy/exchequer more than $ 12 Billion from 2005 to 2021, on three accounts (Losses to PSM + Loss of Revenue to FBR due to steel import discriminatory SROs & DTREs + Additional Import Bill due to closure of Mills) but alleged accused public office holders and their counter-part private sector beneficiaries persons at fault remained unaccountable as yet. Whose responsibility is to investigate “Factors Leading to PSM Losses” and initiation of Accountability process for financial recoveries of taxpayer’s looted money from alleged accused?

  1. PSM yet another target for non-transparent Privatization Process. Instead of appointing a Financial Advisor (FA) of international repute fairly and transparently, Privatization Commission (PC) has appointed as Transaction Advisors a consortium of multiple organizations listed below, some of which are controversial for this transaction and others have no experience for advising on highly technical project like PSM.
  2. a) Pak-China Investment Bank (Consortium Lead)
  3. b) Fergusons & Co.
  4. c) Cornelius Lane & Mufti
  5. d) Abacus Consulting
  6. e) Sino Steel
  7. f) Iqbal Nanjee & Co.

The transaction adviser should have been appointed in accordance with international law and just one qualified company would have been enough as a standard practice all over the world through a transparent process who has technical and commercial knowledge of steel mills its operations and processes. If you forensically review the consortium lead transaction adviser Pak China Investment Company Limited (PCICL) is a Development Financial Institution (DFI) formed under the initiatives taken by Government of Pakistan and Peoples Republic of China for promotion of Trade, Investment and Economic Growth of Pakistan. The company is a joint venture in which equity is equally contributed by Government of Pakistan and China Development Bank (one of the largest State-Owned banks of Peoples Republic of China). It is not in the scope of PCICL to act as transaction advisers as they are already JV partners of Government of Pakistan and any decision or advice coming from them can favor the GOP or Chinese Government being an SOE.

  1. Another controversial member in this consortium is Sino Steel which is also a candidate for PSM acquisition on PPP basis and including them in the consortium for transaction advisory is a very controversial move. The Privatization Commission (PC) has shared the first draft of human resource, financial and tax due diligence with the Pak-China Investment Company (PCIC) and the Bank of China (BoC) for the purpose of reviving Pakistan Steel Mills (PSM).

Reportedly, the current financial position of PSM reflects audited accumulated losses of Rs217.5 bn and total liabilities of Rs307 bn as on December 31, 2020 when compared with Rs9.1 billion accumulated profit as on June 2008. PSM is a highly politicized public sector organization and it was unfortunate that the mills designed capacity of 2.2 million tons per annum (MTPA) was never completed. During two and half years of present PTI Government from July 1, 2018 to December 31, 2020 the losses of around Rs 45 bn and liabilities of around Rs 96 bn have been added to the Corporations balance sheet as per reported audited accounts, for which no accountability of the present PSM management has been made by the Government. The audited accounts up-to June 30, 2021 are yet not finalized by PSM.

Regarding the 3PPP mode some of the institutions (state-owned enterprises) require more capital injections. However, there is a bottleneck in opting for the 3PPP model. The Privatization Ordinance 1973 has no such provisions. Pakistan Steel Mills (PSM) is one of the major units selected for privatization through the 3PPP model without considering its impact to (Construction & engineering Industries) country economy.

PSMC Stakeholders Group maintains that MOI&P appointed non-professional BOD and controversial Management (whose illegally appointed executives’ case CP 4669/2020 is pending in High Court of Sindh, which retrenched PSM employees without any direction from Supreme Court of Pakistan and which is allegedly involved in theft and pilferage of materials) forwarded misleading information and incorrect financial data to MOI&P/Privatization Commission/Labour Court, NIRC, and supreme Court of Pakistan without any fear of accountability. In this regard PSMC Stakeholders Group letter No. PSMCSH/5/2/2021 dated 31 May 2021 was addressed to Mr. Kamran Ali Afzal, Secretary MOI&P “Appeal for Investigation against PSM non-professional BOD & Controversial Management’s Unchecked Corrupt Practices” remained unnoticed as yet.

PSMC Stakeholders Group assure/undertake that PSM can be revived with the help of local human resource and funding subject to Government’s willingness to take following actions: –

  1. a) Reconstitution of PSM BOD, members comprising knowledgeable in the functioning of an integrated steel plant.
  2. b) Appointment of professional Management, capable to motivate the workforce, restore the confidence of business community and attract the investors.
  3. c) Recovery of PSM land from encroachers and settlement of disputes with Government of Sindh.
  4. d) Rationalize Steel import Tariff and abolishment of DTRE.
  5. e) Initiation of transparent accountability process for financial recoveries.
  6. f) Reconciliation of PSM accounts with all creditors and debtors.
  7. g) Settlement of Court cases and payable debts liabilities.
  8. h) Permission to reappoint trained human resource.

We understand that PSM non-professional BOD and controversial Management submitted misleading information and incorrect financial data to PC, ECC, Cabinet and Courts of Law. In this regard following questions from PC to MOI&P, PSM BOD/Management response with documentary evidences would help in understanding the PSM case to save from another blunder:

  1. a) Was the MOI&P directive dated 4th December 2018, appointment of Consultant and Data sharing with M/s HUBCO endorsed by PSM BOD? If yes, the documents should be provided.
  2. b) What was the saleable inventory of PSM materials as on May 2019 and details of sales revenue received from May 2019 to June 2021?
  3. c) Were the accounts of PSM reconciled by Finance & Accounts department with all the creditors and debtors up to June 2021 to ensure the authenticity of financial data? If yes the documents should be provided.
  4. d) What are the PSM losses + payable debts liabilities as on June 2021? Provide the Key Performance Indicators from 1985 to 2021 for evaluation of PSM potential and its successive management performance cost to PSM/Exchequer?
  5. e) What was the criteria and required qualification for appointment of Valuer company/ consultant for the valuation of PSM assets like Land, Plant, Buildings, Vehicles, Spare Parts, Machinery etc.?
  6. f) What is the status of cases challenged in Labor Court, NIRC, High Court and Supreme Court by employees who were illegally retrenched by non-professional BOD/controversial Management?
  7. g) Why present management has made several illegal appointments in officers’ posts on high salaries and perks through nepotism without advertisements in violation of rules after retrenchment of regular officers?
  8. h) Due to the incompetence and non-professionalism of the present management, the central server/ Mainframe of the Corporation went out of order in March 2021 and all important databases (related to Stores inventories, Marketing/ sales, HR, Payroll, Financial ledgers/ transactions, Accounts, Procurement and material management, Gratuity & Provident fund etc.) became inaccessible which could not be restored till now. What action MOIP has taken against this planned damaging of PSM databases and now what will be the authenticity of data provided by the management?
  9. i) Why the data of present stores inventories was not provided completely to the valuator and why these stores inventories (spare parts, tools, machineries/ equipment etc.) of worth several billions have not been valued at present market value?
  10. j) Why the present market value of several thousand tons of semi-finished goods (like M.S. Slabs, Met. Coke etc.) and scrap materials, available in PSM and having worth in billions of Rupees, not included in valuation by valuator firm?
  11. k) Would it be legally appropriate to process the PSM privatization case without taking into confidence to the stakeholders?
  12. l) Would the 1229 acres land for PSM revival, further expansion up to 3 MTPY, is sufficient for operational process and marketing possible without attaching the PSM bulk water reservoir, waste water, sea water, Jetty, Makli, Jhimpir, Hospital, education department, Steel Town and Sales Offices at FTC Karachi, Lahore and Islamabad?
  13. m) The present market value of Industrial land/ plots in the area of Port Qasim Town near PSM is around Rs 90 million per acre according to reports. So, why the valuation of 1229 acres of core plant area (developed) land, having worth value of around Rs 110bn, has not been included in the valuation of core assets transferred to subsidiary?

We understand that PSM employee’s retrenchment (without investigating factors leading to losses) by Government/MOI&P/PSM non-professional BOD and appointment of CEO Brig (Retd) Shujah Hassan Khurazmi is illegal, who executed the retrenchment without any direction from Supreme Court of Pakistan.  PSMC Stakeholders Group letter No. PSMCSH/5/2/2021 dated 31-5-2021, “Appeal for Investigation against PSMC non-professional BOD & controversial Management’s unchecked corrupt Practices” addressed to Mr. Kamran Ali Afzal, Secretary MOI&P which remained unnoticed after passage of around 2 months. Copy of the letter is attached as Annex- B.

  1. It is humbly requested to review the process of inviting EOI for PSM revival through Privatization/PPP prior to disposal of M/s Arif Habib Group review petition and PSM employee’s illegal retrenchment case is pending with Labor Court, NIRC and CA 327/2020 is pending in Supreme Court of Pakistan.

Now, it is proposed that a tripartite meeting between PC, MOI&P/Federal Government, Government of Sindh and Stakeholders be held to help resolve the long-pending issues related to ‘Privatization’ from 2005 to 2021. This ‘process’ from 2005 to 2021, negatively cost to PSM/exchequer more than $ 12 billion in a period of 16 years, whereas PSM required around $ 300 Million for revival of existing 1.1 MTPY plant and around $ 600 million were required to enhance PSM plant production capacity from 1.1 MTPY to 3 MTPY.

PSMC Stakeholders Group representative’s delegation would be available to assist the Government in reviving PSM (as envisioned by Mr. Imran Khan, chairman PTI, prior to election 2018) with local human resource and funding. It would also help in resolving the pending issues through negotiation with frustrated employees, residents of Steel Town/Gulshan-E-Hadeed and creditors to save the government from embarrassment in media, parliament and the courts of law.

It is requested to review the ‘process’ to stop further financial bleeding of PSM, initiated by the MOI&P/Government’s ill-planned and unworkable roadmap proposed by Mr. Abdul Razk Dawood as Advisor MOI&P, appointed to M/s HUBCO as Consultant (having no experience related to revival of integrated steel plant) without endorsement of PSM Board of Directors, in violation of PPRAs rules & regulations, (attached a Technical Committee with the approval of cabinet having Conflict of Interest) approved by Mr. Asad Umar as –

Minister Finance without investigating “Factors Leading to Losses” and its economic impact to country economy. Most regrettably, this path leading to further financial disaster is in direct contrast to the admirable vision of Mr. Imran Khan (now Prime Minister) promised as chairman PTI, prior to election 2018, which was for the uncomplicated revival of PSM.