The recent approval by the Economic Coordination Committee (ECC) to disburse a six-month salary for Pakistan Steel Mills (PSM) employees in the fiscal year 2023-2024, while on the surface appearing to be a positive move, raises important questions about the future of PSM.
PSM has been non-operational since 2015, and during this period, the national exchequer has continued to bear a hefty monthly expense of over Rs.100 million. This decision has left the employees hanging with the hope that PSM, a loss-making entity with accumulated losses exceeding Rs.206 billion, will experience a turnaround. However, the reality is that meaningful progress towards revival has been minimal, and there seems to be a lack of potential investors, except for a single Chinese company.
Privatisation should be considered a viable option for PSM. As it stands, there is little progress in attracting investors or reviving operations. If an outright sell-off is not feasible, alternative options such as private capital infusion, private operations, or seeking technical expertise should be explored. At the very least, a stage-wise plan for PSM’s revival is imperative.
The prolonged financial burden on the national exchequer, despite the facility’s closure for almost a decade, demands a thorough review. It is crucial to make decisions based on merit rather than safeguarding political and vested interests. The government’s approach should be pragmatic, and it should prioritise the efficient utilisation of public funds.
Additionally, the ECC’s decision regarding the transition from London Interbank Offered Rates (LIBOR) to Secured Overnight Financing Rates (SOFR) warrants careful consideration. The change in benchmarks requires a cost-benefit analysis, especially concerning foreign loans and contracts. While LIBOR was forward-looking, SOFR is based on actual rates. The transition must account for compensation in past contracts signed under LIBOR. The international association has suggested compensation rates for different timeframes, and these need to be meticulously assessed and finalised.