ISLAMABAD: The National Accountability Bureau (NAB) has closed an investigation into the curtailment of natural gas supply to Pakistan Steel Mills (PSM) that led to closure of the country’s largest industrial unit in June 2015.
The inquiry was ordered on a reference moved in December last year by then chairman of the National Assembly’s standing committee on industries and production Asad Umar, who is currently holding the portfolio of finance.
The reference sought investigation into why the gas supply was cut to the mill, forcing it to shut down, or no intervention was made by the Pakistan Muslim League-Nawaz government when both the PSM and the gas utility, Sui Southern Gas Company, were owned by the government.
“No incriminating evidence necessitating further inquiry was available, hence the matter merits closure,” stated a recent NAB letter to the PSM, explaining that the “executive board [of NAB] observed that all allegations were examined during inquiry. However, no aspect of criminality was found. On the recommendations of the executive board, the chairman [of NAB] approved the closure of inquiry”.
Move may facilitate consultation with Hubco over revival plan
This comes at a time the ministry of industries and production ordered the PSM to call an urgent meeting of its board of directors to approve ‘consultation as well as data sharing with Hub Power Company (Hubco) for a revival plan.
The PSM board’s chairman has been writing to the ministries of industries and finance for the past couple of months to fill the positions of chief executive officer (CEO) and chief financial officer (CFO), which have been vacant since May 2016 and June 2013, respectively.
Mr Umar wrote in his letter to the NAB chairman that the mill closure was incurring a loss of Rs1.4 billion every month, resulting in loss of precious
foreign exchange due to import of steel. He said the NA panel had decided to send the reference to NAB in July last year, but the communication was delayed by bureaucratic means, compounding the suspicion of collusion in the shutdown of a national asset.
The reference put on record that salaries to employees were being paid with a lag of several months and retirement benefits were overdue for several years with reports of the employees committing suicides.
“Why has the situation been allowed to continue as explained for more than two years without any decision to resolve the problem and who was responsible?” Mr Umar had asked in the reference.
The total losses and payable debt liabilities of the PSM are reported to have gone beyond Rs470billion, including about Rs13bn built since the Pakistan Tehreek-i-Insaf government came to power.
A month ago the government dropped the PSM from its privatisation list, but the company remains without a CEO and a CFO. All the eight executive positions of directors are still vacant while 24 of the 25 general managers are missing.
The only general manager in the mill is looking after CFO’s work.
Informed sources said the PSM revival plan being discussed with Hubco would benefit mostly from an in-depth study conducted by Pak-China Investment Bank, which was the financial adviser in 2015.
According to the study, after an initial investment of $289 million (about Rs40bn at current exchange rate), uninterrupted power supply and a new management, the PSM with its ideal location, market and facilities has the potential of becoming a profitable enterprise.
Also, the industrial complex can generate and put together funds required for expanding its production capacity to three million tonnes from its previous capacity of one million tonnes. The bank had proposed a three-phased development and expansion plan with a capital investment of $288.77 million in the first phase, $300.4m in the second and $296.62m in the third (total $885.8m — approximately Rs123bn).
“The way for PSM to achieve three-phased transformation and revitalisation is through privatisation, formation of a new management team and overall optimisation of the supply chain,” the investment bank said.
It recommended handing over of the management control to a new buyer.
The study concluded, on the basis of field surveys, extensive data and in-depth discussions, that the PSM had a high starting point, complete process chain and the advantages of resource acquisition and regional market. Being situated near the largest city with over 20million population and close to the 50,000-tonne bulk cargo wharf relying on raw material and fuels import, the PSM owned rare logistic cost advantages, it stated. With the expansion of production capacity in future, its harbour could also be used to ship products to the rest of the market.