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Steel Mills at standstill

ISLAMABAD: Having added Rs53 billion losses to its stock of Rs258bn debt and liabilities in 16 months, Pakistan Steel Mills has remained shut for three weeks and there are no signs of its immediate revival.

This is for the first time since its establishment three decades ago that `the mother of all industries` has come to a complete halt mainly because of poor maintenance and repairs as required by standard operating procedures and operational manuals despite internal warnings.

The federal government is yet to order an inquiry into the matter, although the PSM management, while securing Rs18.5bn budget support, had promised in April to achieve 50 per cent capacity utilisation in October and earn a profit of about Rs250 million in January next year with 77pc capacity utilisation.

In October, the plant could produce only 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 for appointment of financial advisers for PSM`s privatisation.

Senior government officials said the country`s largest industrial complex had been closed down on Oct 8 after hot metal 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 l`s cooler burst and the hot metal spread. The converter had been under maintenance since early this year.

The officials said the PSM management had taken a few days to clean the plant and repair the damaged parts but failed to resume production. The plant is unlikely to resume operations soon.

Informed sources said the plant faced a technical fault because it was not being run as envisaged in the operational manual and the quality and quantity of the blast furnace and other input materials were not aligned to the machine design, affecting its production cycle rhythm and sustainability.

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

At risk are foreign exchange expenditures, balance of payments and nonutilisation of human resources, thereby strengthening monopoly of the private sector.

Instead of a metallurgical engineer or a business expert, mechanical engineer retired Maj Gen Zaheer Ahmed Khan was appointed Managing Director of PSM by the PML-N government in April to turn around the mills with a Rs18.5bn budget support. But PSM has added Rs53bn to its stock of debt and liabilities since June last year and about Rs18bn since the new man-ager took over early this year.

Mr Zaheer had promised 20pc capacity utilisation in July, but it stood at 7pc. The capacity utilisation stood at 11pc against a promise of 30pc in August and 21pc in September against the target of 40pc. Production flattened to a maximum of 1871 tons in October against the target of 46,000 tons (50pc capacity utilisation).

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

Interestingly, the PML-N government has informed the International Monetary Fund that PSMhad suffered financial problems because of the 2008 global recession and that it had appointed a professional board of directorsforitsturnaround and subsequent sale.

But a cursory look at the board reveals that most of its members are government servants or belonging to state-owned companies.

`The present state of PSM was due to unchecl(ed corruption, inefficiency, over-employment and government`s lukewarm attitude towards its revival,` former industries and production secretary Shafgat Naghmi reported in a summary sent to the Public Accounts Committee (PAC) of the National Assembly.

He said the problem started in 200809 when PSM had suffered Rs26.45bnoperating losses.

The losses kept on increasing as 4,732 temporary and about 300 dailywagers were regularised with backdated benefits from July 2010, despite strong opposition by the ministries of finance and industries and production.

The man responsible for the en mass regularisation was sacked on the orders of the PAC, reportedly because of his fake degree.

During the hearing of a suo motu case, the Supreme Court had ordered registration of cases against corrupt officials. The Federal Investigation Agency registered 10 corruption cases while a forensic audit of the production and sale and purchase deals was rejected by the PSM board when incumbent Finance Minister Ishaq Dar was chairman of the Senate standing committee on industries and production.

As a consequence, former prime minister Yousuf Raza Gilani had sacked the then PSM chief on corruption charges, but the FIA failed to make any recovery.

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