Decision to lease out Pakistan Steel Mills for 45 years to be taken

ISLAMABAD: As Pakistan Steel Mills (PSM) continues to pile up liabilities, the government is considering leasing the country’s largest industrial complex to a private concern for 45 years under a revenue sharing arrangement, and laying off almost 5,000 employees.

On Monday, a transaction committee discussed various options in this regard, based on which the Privatisation Commission’s board will meet on Tuesday (today) to decide the duration of the lease. Sources privy to the development said a meeting of the cabinet committee on privatisation has been called over the weekend to approve the transaction structure.

“The present state of PSM is due to unchecked corruption, inefficiency, over-employment and the government’s lukewarm attitude towards its revival,” summarised a report to the Economic Coordination Committee by the secretary of the industries ministry.

Read: Pakistan Steel Mills financial woes continue

A previous attempt to sell the PSM by then prime minister Shaukat Aziz to a Saudi-led consortium for Rs21.6 billion ($362 million) was struck down by a landmark Supreme Court ruling in June 2006, which practically led to a halt of the privatisation programme for almost eight years.

The PSM’s accumulated losses and liabilities, which stood at Rs26bn at the end of 2008, have increased to around Rs415bn, including Rs166bn payable liabilities.

The government has injected over Rs85bn out of the federal budget for various bailout packages since than.
A previous attempt to sell PSM to a Saudi-led consortium for $32m was struck down by a landmark SC ruling in 2006

It was clear from the deliberations on Monday that the government would take care of liabilities worth Rs166 billion and offer voluntary separation scheme (VSS) to at least 4,835 employees and outsource the services of some of the remaining workforce to the new operator.

The PSM’s total liabilities and losses have more than doubled since the PML-N government came to power in May 2013. At least $5 billion has been spent on ‘replacement imports’ ever since the PSM was put on ‘hot-mode-zero production’ since June 2015.

An official who attended the meeting of the transaction committee led by Zafar Sobhani, a private sector expert, told Dawn that selling the company at this stage would be difficult to pull off. The options finalised by the transaction committee included a concession agreement or lease agreement with the private concern.

He said three lease or concession terms had been proposed with a maximum of 45 years. A Chinese group, an Iranian firm and a local steel group are reported to have shown interest.

Bidding will be held on the basis of revenue sharing with the government during the lease tenure. The government will convert its Rs33 billion financing/loans and guarantees into equity and issue interest-bearing coupons to the Sui Southern Gas Company for Rs35bn dues and Rs50 billion to banks for interest/loans repayment and bear about Rs17 billion of the employees’ severance cost.

The lease agreement will require the new firm to revive 25 per cent of the plant’s capacity utilisation in the first year, raise it to 50 per cent in the second year and to 85 per cent after that. The government will retain the right to encash the investor’s bank guarantee if the private concern fails to achieve 50pc capacity utilisation at the end of two years or 85pc capacity utilisation between three and five years.

The PSM’s land will remain with the government while the plant and machinery will be handed over to the new company for a maximum of 45 years.

The investor will form a new company registered in Pakistan and operate the plant on its existing premises. All non-core assets will remain the property of the PSM while “all liabilities on PSM books would be settled or restructured by the government before signing the lease or concession agreement with the new investor”.

The government will also ensure resumption of all utilities, particularly natural gas, while the assets or capital expenditures (Capex) will be transferred to the PSM at the end of the lease term for a notional value.

The investor will not be allowed to mortgage existing assets to raise finances but will be free to bring in equipment or invest to revive operations.

The investor will also have to commit to bring in its own working capital and share a revival and expansion plan. “The lessee will pay a lease amount to the PSM as a percentage of revenue.”

The sources said that PSM’s employees will be retained on the PSM payroll and be outsourced to the lessee. The core regular staff strength is currently estimated at 19,700, of which the government expects 4,835 to be laid off through VSS.

A few weeks ago, the Ministry of Industries and Production warned the government that a humanitarian crisis was brewing in the mills because of non-payment of wages and medical expenses. Salaries have been paid from the federal budget for over two years and are considered outstanding since October 2016. Since the mill is no longer considered an “ongoing concern” for auditors, the PSM’s three-year accounts could not be audited.

The PSM had previously leased out about 157 acres of prime land to the Port Qasim Authority for Rs1.467bn on a 30-year extendable lease to ensure emergency payments on account of unpaid utility bills.

Source:The Dawn News

Chairman Senate questions Raheel Sharif's appointment

ISLAMABAD: Chairman Senate Mian Raza Rabbani on Monday directed the government to brief the House on reports about former chief of the army staff (COAS) General (retd) Raheel Sharif’s appointment as the chief of the 39-nation Muslim military coalition and who had allowed this development to take place.

Rabbani asked Defence Minister Khawaja Asif as to who had confirmed Raheel’s appointment as the chief of the military coalition and to explain as to what were the rules for a retired military officer for taking up employment. The first sitting of the 258th session was a private members’ day, as it fell on Monday.

“You defence minister have also half-heartedly confirmed that the former army chief has been appointed as the chief of 39-nation military coalition, for which I am asking some questions which you’ve to answer on Wednesday,” he added.

Rabbani also sought a clarification from the Defence Ministry as to “whether any no objection certificate (NoC) was ever issued to Gen Raheel before he embarked upon a journey for a job in Saudi Arabia and if issued, who did so. And was the government taken into confidence in this context?”

The Senate chairman wanted the ministry to clarify if the former army chief seek any permission from the government or if he took the federal government into confidence before accepting the offer from the Saudi government.

He also directed the government to clarify what would be the repercussions if the former army chief was appointed as the chief of the military alliance, which had earlier been discussed in parliament.

Minister for Defence Khawaja Asif said that the Senate chairman had interpreted his statement as he was not sure about the new job of the former army chief, adding all the details would be provided to the House.

Gen Raheel’s decision to accept the offer from Saudi Arabia has drawn mixed reaction from different quarters of the society soon after his retirement, as Pakistan had earlier refused to become a part of the coalition of the Islamic countries.

The lawmakers also lauded the suo moto notice taken by the Chief Justice of Pakistan on the torture of Tayyaba, a 10-year-old housemaid by the wife of district and sessions judge, Islamabad.

After referring the issue to the Senate Standing Committee on Human Rights, the chairman Senate observed that the judge from whose residence the minor girl was recovered as well as the one who struck a deal between the parents of the victims and the judge should have been suspended to ensure a free and transparent probe into the matter.

“The girl was brutally tortured because she was the daughter of a poor family. It is not enough if I say the issue has put our heads to shame. We must not blame the judiciary for this as such incidents have become a routine matter and the state has badly failed to protect its daughters,” he added.

Senator Muhammad Ali Saif of the MQM said that the criminal justice system should be revamped and added it was a systematic decay that if not addressed, such incidents would keep happening.

Senator Hamdullah Khan of the JUI-F questioned who will bring the judge to stand in the dock of justice, as the person at whose residence this incident took place, should be taken to task for maltreatment of a minor as he does not deserve to sit on the chair of justice.

PML-N’s Senator Mushahidullah Khan termed the issue a test case for the top judiciary, saying those who helped their colleague judge in striking a deal without any punishment should be taken to task.

He contended that the suo moto taken by the chief justice would be of no use if the accused district and sessions was not 'called in the dock'. He insisted the judge along with those, who bailed him out, should be made an example.

PPP’s Osman Saifullah called on the government to adopt his bill (in the National Assembly) -- the Domestic Workers Employment Rights Bill, passed already by the Senate early last year. “The government is urged to adopt this bill in the assembly so that we don't see travesties of the type we saw with the little girl Tayyaba,” he remarked.

He was confident that the adoption of the piece of legislation would massively help in dealing with the menace of unleashing violence on domestic workers. Some of the lawmakers blamed the incident as an overall social evil, for which the society as a whole should rethink, but Senator Usman Khan Kakar confronted his colleagues not to give a clean chit to the state as it was the responsibility of the government to rein the corrupt elements whether in the judiciary, bureaucracy, or anywhere else.

Rabbani issued orders to the interior minister to brief the House on Tuesday about four human rights activists along with a university professor Salman Haider, who had gone missing from different parts of the country.

Earlier, addressing Law Minister Zahid Hamid, Rabbani drew his attention to what he called some very disturbing reports pouring in amid a lot of talk against corruption and corrupt practices that an amnesty scheme was being introduced again to whiten the black money and a ‘relief’ for those who were tax defaulters. He added in the past as well, such schemes were brought but these produced no tangible results and those who benefitted from it return to their old ways and waited for a new one. “So, let the axe fall on somewhere,” he insisted.

Rabbani made these remarks when Senator Muhammad Javed Abbasi laid his committee report regarding the review of Section 25 of the National Accountability Ordinance, 1999, which deals with voluntary return and plea bargain. The committee had held deliberations on the matter when PPP Senator Farhatullah Babar had raised the issue in the House and it was referred by the chair to it for review and report.

Senator Mir Kabeer Muhammad Shahi laid in the Senate the joint report of the functional committee on Devolution and Standing Committee on Inter-Provincial Coordination regarding the establishment of permanent secretariat of CCI. Chairman Senate asked the Law Minister Zahid Hamid that he had seen the report and said that in his view placing the Council of Common Interests Secretariat under the Ministry of Inter-Provincial Coordination might not fulfill the requirement of Article 54, clause 4.

Source: The News