Fate of the Steel Mills

Peanuts?

In the Fiscal Year 2000-01, then Finance Minister Shaukat Aziz famously remarked that it would better to sell off the Steel Mills that were bleeding the economy, even if they had to be sold for one rupee. 157 acres of prime land has already been leased on a 30-year extendable lease to the Port Qasim Authority for Rs1.467 billion to ensure emergency payments of unpaid utility bills are made. That in addition to the Rs164 billion cumulative losses, Rs50 billion in NBP loans, Rs10 billion in loans from other banks, Rs40 billion gratuity dues and the Rs40 billion overdue bills owed to the Sui Southern Gas Company (the last of which resulted in cut off of gas supplies, which finally caused the unit to shut down one and a half years ago). Privatisation would have resulted in loss of jobs; one reason why the federal government was so opposed to the idea.

It is now the end of 2016, and the government seems to have finally had enough of injecting capital in the staggering state owned industry and handing out bailout packages (the most recent one was of Rs18.5 billion). It has been announced that the Steel Mills are to be leased to interested foreign parties, one of which, it has been disclosed, is the Chinese Bao Steel Group. All efforts must now be made to ensure that mills aren’t handed over for peanuts.

The situation is now so delicate that it is hard to imagine expressions of interest by prospective buyers, and the government has a long way to go if this is to be rectified. Of course, the mills need a capital injection of at least Rs50 billion just to get it operational enough for the deal to go through – money the government doesn’t have. The first step would be to resume gas supplies, something the petroleum ministry will have to look in to. The terms of a possible lease must also be good enough to ensure that this bleeding industry resumes production and efficiency.