The promised privatisation of Pakistan Steel Mills (PSM) has taken an interesting turn. A meeting of the CCoP chaired by Finance Minister Ishaq Dar on 2nd October, 2015 had decided to offer PSM to the Sindh government but Chairman, Privatisation Commission, Muhammad Zubair does not favour such a proposal.
Speaking to the media on 14th October, he said categorically that he was against offering the first right of refusal to the Sindh government to run the PSM. The PSM had incurred losses of over Rs 113 billion till March, 2015, including taxes of Rs 33 billion, but the mill management had not informed the commission about the losses. Asked about the remarks of Minister for Planning, Ahsan Iqbal that this was not the right time for privatisation, Zubair responded that “everyone has his own view but final decision is of the Prime Minister’s.” He reiterated that privatisation was central to the reform agenda and was not being done on the dictates of the IMF and the World Bank. “The commitment towards privatisation is there for the last 25 years; IMF or no IMF”, because this was for the betterment of the people and the country.
Four tiers of check and balance were put in place to ensure transparency in the privatisation process which included evaluation committee, transaction committee, board of directors of Privatisation Commission and CCoP. Reacting to the criticism of the media for the slow pace of privatisation, the Chairman Privatisation Commission said that this was the most challenging financial transaction and any major transaction takes three to four years to materialise. Currently, there were 25 active transactions and in the case of Fesco, PIA and PSM, transaction structures had already been approved. The privatisation of PIA is, however, not possible without amendment in the PIA Act for which a request to the Finance Ministry has already been forwarded.
It may be mentioned that various governments in the past were committed to pursuing privatisation in order to address structural imbalances, liberalising the economy and opening it to competition. Also, it was rightly felt that doing business was not the business of the government. For the last few years, however, the privatisation programme had entered a lean period due to domestic and global challenges, including poor law and order situation and negative economic outlook which has adversely affected investment climate in the country.
The PML (N) government, sworn in June, 2013, had placed the privatisation programme at high priority to turn around the loss-making PSEs through restructuring with the assistance of strategic sector partnership, who had the capacity to invest and provide capable management. Looking at the progress so far, we feel that the present government is at least making the right efforts to accelerate the privatisation process which is probably the only way to introducing innovation, ensure efficiency and enhance productivity and competitiveness in the world markets. Success of privatisation programme is, nonetheless, contingent upon the support of various stakeholders, including government agencies, strategic investors and most importantly labour unions of the relevant PSEs who are mostly up in arms at the time of privatisation and sometimes force the government to retract its decision.
There could probably be no argument against the privatisation of PSM as it is bleeding the exchequer as its performance is hopeless. However, Sindh government’s desire to take over the mill is not understandable. May be, it liked to follow the KP government which had desired to take over the Pesco and Federal Water and Power Minister had offered the company to the provincial government.
The federal government is expecting a decision by the Sindh government in a few weeks on the issue but handing over the PSM to the provincial government would not be in country’s interest. Losses incurred by PSM show that it would be very difficult for the Sindh government to bear this kind of loss when its budgetary position is not in a very satisfactory state. At present, even the salaries of staff are being paid by the federal government. Secondly, Sindh government has neither the expertise nor the resources to assume such a huge responsibility. Some of the analysts are even afraid that the provincial government could increase its staff by employing its favorites, damaging the financial position of the PSM further and making it more difficult to find a strategic investor to manage the enterprise. So far as the timing of privatisation as mentioned by Ahsan Iqbal is concerned, experience suggests that delay in the process only results in the rise of losses in the PSEs and more stringent attitude of the labour unions which are often backed by the opposition parties.
Source: Business Recorder