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    South Asia
     May 3, 2012


Javed back to top PSM post
By Syed Fazl-e-Haider

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.

(Copyright 2012 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)





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