Plan to lease out Pakistan Steel Mills for 45 years

[AZADPAKISTAN2009]

Today they announced during the Privitization (someone came on TV claiming to be from the Privitization Group)

• 0% debt will be taken by new owner
• For 3 years no money would be due for the new owner

• For 3 years State will get ZERO BUCKS !!!

They make it seem its like a Orphan company

While the company is state owned (Meaning indirectly owned by Citizens of state) yet they won't release the name of people who are in the mix to buy this at such redicilous rates

• Guess what in 3 years the Government who will sell and take their cut won't be in power

It is a well known fact Three groups have shown interest in past
a) Russia
b) Iran
c) China


"Their plan is , someone will come just make it run in 3 year time , they will get all existing machinery (which obviously all works) and just all they will do is make it work i.e Management
For 3 years they will RACK in the Profits recover 10 times their investment it will be literally cost this group 0 bucks !!!! "


When TV analyst asked them so what exactly is their investment amount commitment ?

Answer : "Silence we can't say anything till process is concluded "



Proper Sale / Lease plan is

• The group is offering 5-8 Billion for Lease rights (Immediately)
  
• Then the group will start paying share in revenue after 3 years during the 3 years they will make the company operational and profitable

What kind of dumb plan is this ? After conclusion of deal no one will get anything for 3 years
Government will get 100% debt overloaded to tax payer


The STATE could have hired a international consulting firm and did same process and retained 100% of profits vs this stupid profit share model and just paid the International consulting form 50 MIllion dollars or so for their consulting and turn around strategy

 

[Ram Mahadev]

its better to lease out to russian or iran they r looking for business to invest in

Why not Chinese. They will do good for Pakistan

 

[Manidabest]

Why not Chinese. They will do good for Pakistan

well present day steel mill was established with russians so i think it will be fair to give their share back and let them run it ..

will probably get to china mostly

may be ... saudi's private group is after it too

 

[BlackMist]

Federal and Provincial government should sell all the corporation and should focus on providing good business environment and collection of tax. Why the public should pay the salaries and perks of corrupt, in competent and good for nothing people?



Why no layoffs? Why any investor will keep the leaches who can't contribute towards profitability and suc.ks the resources?

If Gov't tries to for layoff, it will have huge backlash which this government is not capable to handle. Moreover, other political parties will never support this for their political reasons.

 

[Sugarcane]

If Gov't tries to for layoff, it will have huge backlash which this government is not capable to handle. Moreover, other political parties will never support this for their political reasons.

It's responsibility of government to make the people realize and ensure that the public money which is being wasted to feed and bailout the parasites will be spent on things which matters to general public.

 

[BlackMist]

It's responsibility of government to make the people realize and ensure that the public money which is being wasted to feed and bailout the parasites will be spent on things which matters to general public.

Only if public is civilized and not driven crazily by different leaderships

 

[Gufi]

• Cheaper option is Offshoring the Management of the company to European Firm let Senior Managers come in from outside let them figure out who needs to be fired who needs to be hired to turn things around ( Won't cost more then 50 Million dollar) . The firm will lay out a strategy and plan to Turn company around and give you yearly estimate of goals for 2-3 year turn around figures. This is what Global Consulting Firms do !!!

no political party fires public servants.... it is better to have a 20 year lease and for PIA also.... let the axing be done where needed

 

[khanmubashir]

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.

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.

Published in Dawn January 17th, 2017
http://www.dawn.com/news/1308868/plan-to-lease-out-pakistan-steel-mills-for-45-years

Doughtful if it goes through and more details needed to satisfy imminent judicial inquiry

 

[marbella]

Well, leasing is a good option but it should be cleverly done , with keeping own interest in mind. It has thousands of jobs, make sure to maintain number of employment with own Nationals.
Anyone remember ' Florange- Arcelor Mittal' ?

 

[ziaulislam]

why lease even if we gift PIA and steel mils for free we can save billons of ruppes per year look at the lose of both

we wasted 1 trillion rupees on these two. Our supreme court judge single handed wasted 600 billion rupees that is equal to top notch hospital in every district or 100 imran khan cancer hospital(in just last 8 years), and the amount we are spending now to subsidize this is more than enough o have run these 100 top hospitals, it would have provided far more jobs

remember political parties to what we want them to do, i remember everybody was against privatization back in 2008 even them most educated people, even know PML n wants to but is afraid of "awam" back lash

that is more than what we have spent on education in last 75 years
so we would have been a developed country with respect to education and health had there been no steel mills or PIA
steels mills did it job just for 5-10 years, PIA glory days ended way back in 80s, we infact have stopped their glory by killing privitzation

 

[Syed1.]

Can somebody ask the question why the Steel Mill keeps on losing money but Nawaz Sharif's own steel mills keep turning over a profit year after year.

 

[ziaulislam]

I mean the Government should have a plan to tackle the problem not just lease it for any random shit price offered

If buyers can't pay 7-8 Billion USD for the company , then they are not the ideal company to work with considering it is a lease for 35 years

• You can make 105 Billion Dollars over 35 years , if you made 3 billion annual profits (Competent Management)
• You can make 158 Billion Dollars over 35 years if you made 4.5 billion annual profits

(And these estimates are what normal Steel Mill companies make world wide)

• Cheaper option is Offshoring the Management of the company to European Firm let Senior Managers come in from outside let them figure out who needs to be fired who needs to be hired to turn things around ( Won't cost more then 50 Million dollar) . The firm will lay out a strategy and plan to Turn company around and give you yearly estimate of goals for 2-3 year turn around figures. This is what Global Consulting Firms do !!!

• Offshore it to GERMANY (Upper Management) Or Turkey/ China

Fire all the guys in Pakistan Steel Mills with Title of "DIRECTOR" , CEO , CFO , CMO, Manager
Might as well fire the HR managers as well as they have recruited some shitty workers

PPP hired their Jiyala between 1990 to Present and it has messed up the Organization the solution is Changer UPPER management

who the hell in their right mind will pay for 7-8 billion dollars just for brand of pakistan steel mills
man the equipment is outdated and useless
if someone does lease this which is highly unlikely now it will only be due to fact that govt will be providing tax holidays and taking up all new liabilities, which by some unknown poor logic govt is not ready to provide to a new entrant, now honestly whats the difference between this agreement and new entrant ..nothing, the only thing is that "awaam" will be happy, the name steel mills we go on and the corrupt people who are there in first place will keep their jobs at the expensie of billion rupees to poor people in the name of tax holidays

 

[Syed1.]

Just sell it for a nominal amount of 1 ruppee, because at the moment it's worth is negative 200 billion ruppees.

The machinery is outdated by several decades it has zero worth.