Pakistan Steel Mills
|Traded as||PSM-X (KSE BRIndex30)|
|Industry||Steel and iron producers|
|Key people||Wasif Mahmood
Ministry of Industry
(Board of Directors)
|Services||Metallurgy and Material science|
|Revenue||₨. 4.3 billion (2011-12)|
|Operating income||₨. 1.4 billion (2011-12)|
|Net income||₨. 5.7 billion (2011-12)|
|Total assets|| ₨. 72.5 billions —125.5 billions (2012)
|Owner(s)||Government of Pakistan|
|Website||Pakistan Steel Mills|
Pakistan Steel Mills (Urdu: پاکستان اسٹيل ملز; reporting name: PSM), is a global competitive, multi-billion state-owned megacorporation and the producer of the long rolled steel and heavy metal products and entities in the country.
Headquartered in Karachi, Sindh Province of Pakistan, the PSM is the current largest industrial megacorporation undertaking having a production capacity of 1.1—5.0 million tonnes of steel and iron foundries. Built with the contributions of the Soviet Union in 1970s, it is the largest industrial megacorporation complex, vastly expanded in an enormous dimensions construction inputs, involving the use of 1.29Mn cubic meters of concrete; 5.70Mn cubic meters of earth work; and contains ~330,000 tonnes of heavy machinery, steel structures and electrical equipments.
A controversial attempt was made to privatize the steel mills to global private ownership under a counter-measure Privatization Programme of Prime minister Shaukat Aziz. All attempts were thwarted by the Supreme Court which launched a full-fledged investigation against the attempts to privatize as private sector too lost the control of the steel mills in matter of weeks. In spite of its enormous size and expansion, only 18% of the capacity was in use and the steel mills requested a bailout plan of Rs.12 billion to prevent its closure; the bail out plan was dismissed by the government. Finally, the steel mills was brought back to government-ownership management under an inverse counter-measure Nationalization Programme of Prime Minister Yousaf Raza Gillani and since then, its operational plant capacity has been reached to 30%—50% after seeking the government financial assistance.
After the state establishment of State of Pakistan in 1947, the Government of Prime minister Lyakat Ali Khan, came to realized to a thinking mind-set that the goal of progressive industrialization nearly impossible without the possession of a self-reliant iron and steel foundry. Initially, the foreign dependence on imports caused serious economical setbacks to the state along with an extortionately high import bill which would be impossible to support. The initial idea and studies were conceived by the Council of Scientific and Industrial Research (PCSIR) and put forward the concept to the Five-Year Plans of Pakistan (1955-1960). In 1958, Soviet premier Nikolai Bulganin offered technical and scientific assistance to Prime minister Suhrawardy regarding the steel mills and expressing interests in establishing the country's first steel mills.
The project was comprehensively debated in the governments of Prime Minister Huseyn Suhravardie and President Ayub Khan; the manufacturing process, supply sources of the requisite machinery and raw materials, plant site, domestic ore versus imported ore, ownership pattern, product mix and all foreign financing credit kept the project on hold for a considerable time.
After 20 years of policy development and studies of PCSIR, President General Yahya Khan gave the approval of the recommendations of the state-owned scientific think tank, the Council of Scientific and Industrial Research. Bureaucrats and scientists agreed upon an unified decision that the "Karachi Steel Project" shall be sponsored in the state-public sector, under which a separate corporation sanctioned by the Companies Act, will be formed.
In pursuance of this decision, the Pakistan Steel Mills Corporation Limited (PSM Ltd.) was given commissioned and incorporated as a private limited company in a public sector in the accordance of Companies Act of 1913, to be established in Karachi, Sindh Province of Pakistan. Contacts were made to United States but the U.S. government showed lack of ambitions and interest in the project; therefore the studies were sent to Soviet Union who took the initiatives. The United States forcefully refused to provide or give any kind of assistance, as the creation of any such kind of basic industry in an underdeveloped country was considered a threat to their own exploitative imperialist agendas.
Finally, an agreement was reached with the V/O Tyaz Promexport of the Union of Soviet Socialist Republics (USSR) in January 1969. In 1971, Pakistan and Soviet Union finally proceeded to entered in a government agreement, upon which, the Soviet Union agreed to provide techno-financial assistance for the construction of a coastal based integrated steel mill at Karachi.
In 1956, the Krupp industries of West Germany offered to set up a steel mill based on Kalabagh iron ore, coal and most other minerals available within about 11 miles (18 km). The project was dismissed by ministry of energy led by its minister Zulfikar Ali Bhutto who accepted the Soviet studies instead as Bhutto favoured the idea to established a one single enormous steel mill based 100% imported steel and iron ore instead of local ore at Kalabagh District. In June 1966, another West-German steel firm, the Salzgitter AG produced ~5,000 tonnes of quality steel from 15,000 tonnes of Kalabagh iron ore in the presence of some international experts, and sold it to Volkswagen. The company offered in August 1967 to set up Kalabagh Steel Mill of over 0.8 million tonnes per year capacity based on Kalabagh iron ore and imported coal at an estimated cost of Rs. 1.55Bn, including foreign exchange cost of Rs. 878Mn. The European banks offered loans for this project, which confirms technical and financial viability of the project. All attempts were dismissed after projects were politicized enough in the civil bureaucracy.
The Pakistan Steel Mills was established as an integrated steel mill under a programme called, Nationalization programme in 1970s. The foundation stone for this gigantic integrated project was laid on the 30 December 1973 by prime minister Zulfiqar Ali Bhutto. The mammoth construction and erection work of the integrated steel mill, never experienced before in the country, was carried out by a consortium of Pakistan construction corporations under the supervision of Soviet and Pakistani experts. Mr. Khaja Inayath ullah was the Director Operations & Chief engineer of this project. (Blast furnace 1&2 & RMPP)
The main production units were constructed with a host of infrastructure facilities involving unprecedented volumes of work and expertise. Component units of the steel mill numbering over twenty and each a big enough factory in its own right were commissioned as they were completed between April 1981 to August 1985 with the Coke Ovens and By Products Plant coming online first and the Galvanizing Unit last. Commissioning of Blast Furnace Number 1 on the 14 August 1981 marked Pakistan's entry into the elite club of iron and steel producing nations. The project was completed at a capital cost of Rs. 24.7Mn. The completion of the steel mill was formally launched by President General Zia-ul-Haq on 15 January 1985.
Soviet scientist Dr. Mikhail Koltokof flew to Pakistan and settled in the country to provide training to Pakistan's technical staff. Engineer Niaz Muhammad and materials scientist Wahab siddiqui received training in Soviet Russian and trained thousands of scientists and technical staff. Their inspirations and innovations got led them to learn the highest award from Pakistan, and also from Soviet Union. The Government of Pakistan conferred them with Pride of Performance.
Dividends and business assets
Pakistan Steel Mills not only had to construct the main production units for 2.2 MTPY, but also a host of infrastructure facilities involving unprecedented volumes of work and expertise. Component units of the steel mills numbering over twenty, and each a big enough factory in its own right, were commissioned as they were completed between 1981 to 1985, with the Coke Oven and Byproduct Plant coming on stream first and the Galvanizing Unit last. Commissioning of Blast Furnace No.1 on 14 August 1981 marked Pakistan's entry into the elite club of iron and steel producing nations. The project was not completed at a capital cost of Rs.24,700 million and commissioned for production of 1.1 MTPY. Due to its infrastructure and enormous expansion capacity, it is difficult to determined the current value of assets of Pakistan Steel Mills, while others approximating the business assets reaching to then range from Rs. 72.5Bn to Rs. 100Bn of total value. By estimating, including the heavy machinery, dividends, facilities, and external and internal assets, the market price of the land of the Steel mills are exceeding to the amount of Rs. 125.5Bn, as per the government estimates against the market value of Rs 945 billion as on 2006 investigation by a potential bidders who was withdrew from the bidding process for reason not known.
The completion of the steel mill was forced to stopped due to liquidity crises and formally launched after 12 years by the then-President of Pakistan General Muhammad Zia-ul-Haq on 15 January 1985. Pakistan Steel today is the country's largest industrial undertaking, having a production capacity of 1.1 million tonnes of steel and not completed to its lay-out design of 2.2 MTPY in a period of 40 years (1973 to 2013).
Headquarters and production expansion
Pakistan Steel Mills are one of the enormous and gigantically expanded industrial complex in the country that is located at a distance of 40 km Southeast of Karachi at Bin Qasim near Port Muhammad Bin Qasim. It was found to be an ecologically preferable location, alongside a tidal creek and having a wind direction away from the city of Karachi.
Pakistan Steel Mills is spread out over an area of 18,660 acres (75.5 km2) (about 29 square miles (75 km2)) including 10,390 acres (42 km2) for the main plant, 8,070 acres (33 km2) for the township and 200 acres (0.8 km2) for the 110 MG water reservoir. In addition it has leasehold rights over an area of 7,520 acres (30 km2) for the quarries of limestone and dolomite in the Makli and Jhimpir areas of Thatta district. It is one of the largest industrial complex in Pakistan as well as in South Asia and due to its enormous expansion, the steel mill has its own educational facilities (see Pakistan Steel Cadet College and Pakistan Steel Institute of Technology), housing and residential programmes, parks and recreation facilities and police services apart from the provisional authorities.
Due to its importance, the steel mills followed a strict environmental policies regulated by the Environmental Protection Agency (EPA) of the Ministry of Environment (MoE). All health safety and healthy working environment continuously regulated under a designed system. Pakistan Steel Mills, besides its core activities, has done a lot in making the environment in and around Pakistan Steel green and beautiful through the addition of three unique projects; the Quaid-I-Azam Park; The Quaid-I-Azam Cricket Park; and the Quaid-I-Azam Beach. The Quaid-I-Azam Park, which spreads out over an area of 45 acres (0.18 km2), consists of a series of six interconnected lakes, lush green lawns and grassy terraces, colorful flower beds, fountains, life-size steel-made models of wild and marine animals, a jogging track, a bird sanctuary and mini-zoo, as well as a children's play and recreational ground and boating facilities. The steel mills also active in sports development and also has a football team Pakistan Steel FC that currently competes in the Pakistan Premier League.
Privatization of steel mills
Since its foundation, the steel mills has been under the management of government-ownership and strictly put under the close coordination of civil bureaucracy. In 2006, Prime Minister Shaukat Aziz decided to integrate the steel mills under the intensified programme, called the Privatization Programme. When the news reached to the country, amid demonstration and spontaneous protest began to take place against the government of Shaukat Aziz and sparked lengthy debates in parliament, which members of the opposition walked out of in disgust.
The consortium involving Saudi Arabia-based Al Tuwairqi Group of Companies submitted a winning bid of $362 million for a 75% stake in Pakistan Steel Mills at an open auction held in Islamabad. The consortium including the Magnitogorsk Iron and Steel Works (Russia); the al-Tuwairqi Group of Companies (Saudi Arabia); and the Arif Habib Securities (Pakistan) paid a total Rs. 21.6 billion ($362 million), or Rs.16.8 per share, to take control of Pakistan's largest steel manufacturing plant. Tuwairqi Group of Companies, one of the Leading business concerns in Saudi Arabia, also launched a $300 million steel mills project at Bin Qasim. The group will set up Tuwairqi Steel Mills (TSM), a state-of-the-art steel-making plant in the southern port city of Gawadar, Pakistan.
The entire privatization programme of prime minister Shaukat Aziz came to halt when WATAN PARTY filed a petition UNDER SECTION 184 (3) through its Chairman Barrister Zafarullah Khan in the Supreme Court of Pakistan vide SMC No. 9/2006 against the privatization citing irregularities in the process which was accepted by the Chief Justice of PakistanJustice Iftikhar Chaudry.
The Supreme Court on 8 August 2006 held that the entire disinvestment process of the Pakistan Steel Mills reflected a haste, ignoring profitability aspect and assets of the mills by the financial adviser before its evaluation. The transaction was the outcome of a process reflecting procedural irregularities, said the 80-page judgement in the PSM case.
On 23 June, a nine-member bench of the Supreme Court had annulled the sale of the country’s largest industrial unit to a three-party consortium and had directed the government to refer the matter to the Council of Common Interests (CCI) within six weeks. It had declared the $362 million transaction with the Russian-Saudi-Pakistan investors as null and void.
Authored by Chief Justice of Pakistan Justice Iftikhar Mohammad Chaudhry, the judgement said the entire exercise reflected a haste by the Privatisation Commission (PC) and the Competitive Committee on Privatisation (CCP). The PC had processed the 30 March final report of the financial adviser the same day and a meeting of the PC board and a summary had also been prepared the same day when a six week time was mandatory to examine and fix a fair reference price for approval by the CCOP.
The privatization had the disastrous effects on steel mills, and it was lost by the private sector due to their inability to run such giant large-scale operations of steel mills. Under private sector, the steel suffered loss in its net worth and declining of producing capacity of the steel mill. The Economic Coordination Committee (ECC) was forced to approved a bail out package after the private sector, the Tuwairqi Steel Mills pulled off its investment from steel mills instead established another steel mill industry to compete against the steel mill.
Despite all its problems, the steel mills is a paradigmatic employer and would rather see itself run into the ground than mistreat its long standing employees. In the midst of all the troubles that it is facing, the mill started issuing letters confirming their jobs and start producing the heavy steel and iron materials. After leading to an infernally long protest and inability proved by the private sector, the government of Prime Minister Yousaf Raza Gillani activated the nationalization programme after accepting the recommendations, despite protest lodged by the Finance minister Abdul Hafeez Shaikh.
In 2011, the steel mill was put under the management of government-ownership, expanded and re-structured the board of directors would be restructured and expanded, from the current nine to twelve members as well as approving another bail out plan. In matter of weeks, the private-sector voluntarily handed over the operations of steel mills to government-ownership management, a move that was widely appreciated in the public society and workers' unions. Since under the government-ownership, the steel mills infrastructure and available capacity was restructured and expanded. In 2012, Ukraine announced to provide the technological development and help in restoration of raw materials supply chain after viewing the performance of steel mills. The Ukrainian Ambassador quoted, "for major operational units of Pakistan Steel Mills is remarkable". The Ambassador of Ukraine Volodymyr Lakomov said that Ukraine is keen to make business relationship with Pakistan and the steel mill PSM will be a "symbol of friendship" between the two countries.
- Khan, Israr (April 12, 2012). "Pakistan Steel Mills denied Rs9bn bailout package". The News international, Thursday, April 12, 2012. Retrieved 4 June 2012.
- Qaiser Zulfiqar (March 10, 2011). "Pakistan Steel Mills: Court calls for quick investigation". The Tribune Express. Retrieved 4 June 2012.
- Haider, Haroon. "Pakistan Steel Mills Scandal". Haroon Haider.
- Karachi Origins (May 10, 2010). "Pakistan Steel Mills vs the Economy". The Tribune Express. Retrieved 4 June 2012.
- Press Release. "History of Pakistan Steel Mills". History of Pakistan Steel Mills.
- Karachi Stock Exchange. (April 29, 2009). "Pakistan Steel Mill production capacity to enhance up to 5M Tons". Karachi Stock Exchange. Retrieved 4 June 2012.
- Khan, A.A. "Pakistan Steel" (pdf). Pakistan Stee Mills. Pakistan Stee Mill Directorate for Public Relations and Human Resources. Retrieved 4 June 2012.
- Borthwick, Malcolm (1 June 2006). "Pakistan steels itself for sell-offs". Asia Business Report editor, BBC World, Port Mohammad Bin Qasim. Malcolm Borthwick, BBC Pakistan. Retrieved 4 June 2012.
- Government Report; Government Report (August 9, 2006). "Supreme Court in Pakistan Steel Mills Case". Senior Justices of the Supreme Court. Supreme Court of Pakistan. Retrieved 4 June 2012.
- Kiani, Khaleeq. "Pakistan Steel in dire straits; liability Rs110bn." DAWN Media Group, 19 September 2011.
- Iftikhar Firdous (December 15, 2011). "Railways, Steel Mills taken off the chopping block". The Tribune Express, Iftikhar Firdous. Retrieved 31 May 2012. "In a major blow to the economic liberals in government, the federal cabinet decided against the privatisation of eight of the largest state-owned companies, including Pakistan Steel Mills"
- Adnan Ali Shah. "Pakistan-Soviet Union Relations". Institute of Strategic Studies, Islamabad. Institute of Strategic Studies, Islamabad. Retrieved 26 February 2012.
- Imjadh, Majid. "Pakistan Steel: White Elephant or Healthy Prey?". International Marxist Tendency. International Marxist Tendency. Retrieved 4 June 2012.
- PSM. "Environmental Policy". Pakistan Steel Mills. Environmental Policy. "Pakistan Steel has in place a strict environmental policy. We are committed to the continuous improvement of our environmental performance. At Pakistan Steel we take our environmental responsibilities seriously and environmental protection is intergrated in all our business and process activities. Adherence to our strict policies and undertaking work consistent with international standards have enabled us to meet or exceed applicable legal requirements."
- PSM. "Steel Mills Recreation". Pakistan Steel Mills. Steel Mills Recreation. Retrieved 4 June 2012.
- Our staff reporter (May 23, 2012). "Ukraine to provide tech help for Steel Mills". The Nation, May 23, 2012. Retrieved 4 June 2012.
- Staff Reports (23 May 2012). "Ukraine to provide tech help for Steel Mills". Pakistan Tribune, 23 May 2012. Retrieved 4 June 2012. "The Ambassador of Ukraine Volodymyr Lakomov said that Ukraine like to make good business relationship with Pakistan and hope that PSM will be a symbol of friendship between the two countries."
- Mirza, Iqbal (May 26, 2012). "kraine envoy for establishment of joint ventures". Business Recorders. Retrieved 4 June 2012.