KARACHI - The Pakistan government has
turned to a retired major general, Muhammad Javed,
to revive the failing state-owned Pakistan Steel
Mills (PSM) as chief executive, four years after
Prime Minister Yousaf Raza Gilani turfed him out
as head of PSM when the country's only integrated
steel manufacturing plant was a successful
concern.
The mill, the country's largest
industrial unit, is losing 1 billion rupees per
month and has been operating under an acting chief
executive since July 2010. Gilani last year agreed
to a 20 billion rupee (US$220 million) bailout
package, and working capital of 6 billion rupees
was approved last December to avoid PSM's imminent
shutdown. The finance ministry made the release of
funds conditional on the appointment of a CEO,
reconstitution of
the PSM board and
expansion of the plant.
Javed served as
PSM chairman from September 2006 to May 2008, when
the plant operated at between 80% and 90%
capacity, made a profit of 5 billion rupees over
the two years to June 30, 2008, and 2 billion
rupees in debt was paid off. When he was sacked,
the company held cash reserves and finished goods
worth 20 billion rupees and four months stock of
raw material. The company made a profit for seven
consecutive years to 2007.
Production
capacity under the present government, which took
office in early 2008, has collapsed to 18% and its
liabilities exceed 110 billion rupees. The
enterprise has been wracked by corruption and
crippled by changes in senior executives.
Javed, who replaces acting CEO Wasif
Mahmood, said his priorities are increased
production utilization, ensuring continuous
availability of raw materials and transparency in
procurements, and boosting sales.
"The
gradual utilization of local iron ore will be our
priority for increasing production," The Nation
reported him telling senior company officials. "An
expansion programme will also be implemented on a
fast-track basis."
PSM, set up in the
early 1970s with the assistance of the Soviet
Union, has a production capacity of 1.1 million
tonnes of steel products a year, compared with
local demand of around 6 million tonnes.
Russia last May agreed to finance a US$350
million expansion to boost capacity to 1.5 million
tonnes per year on condition the contract go to
state-owned VO Tyazpromexport. The Russian company
in 1969 helped to prepare the initial feasibility
report to set up PSM. Last year's deal violates
the rules laid down by the Pakistan Procurement
Regulatory Authority.
Javed's biggest
challenge may be to root out corruption at
managerial level. Last year, the Federal
Investigation Agency unearthed a PSM scam that
caused a loss of 50 billion rupees in revenue to
the national exchequer and 100 billion rupees to
PSM.
The scam involved more than a dozen
companies, which imported an estimated five
million tonnes of raw material, tax free, from
2007 to 2010. They made fake transportation
documents to declare they had installed
manufacturing units in different parts of the
country. They then sold the raw material to local
companies whose products hurt PSM's sales, causing
a loss of around 100 billion rupees in the period.
Even before then, the PSM chairman who
succeeded Javed in May 2008, Aftab Moeen Shaikh,
had been sacked on alleged corruption charges in
August 2009.
Shaikh was briefly succeeded
as chairman by M M Usmani, who in March 2010 was
replaced by Malik Asrar Hussain, when "chief
executive officer", rather than "chairman", was
adopted to designate the senior company executive.
Hussain resigned in June 2010 and the post has
been vacant since then.
Javed, who holds a
masters degree in political science and strategic
studies, is a former director general (military
training) and served as chairman of Pakistan
Ordnance Factories from 2004 to 2006.
PSM's factories are spread over 7,500
hectares, 40 kilometers southeast of Karachi near
the port of Muhammed Bin Qasim.
Syed
Fazl-e-Haider
(http://www.syedfazlehaider.com) is a
development analyst in Pakistan. He is the author
of many books, including The Economic
Development of Balochistan (2004). He can be
contacted at sfazlehaider05@yahoo.com.
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