Abstract

In the modern era, steel mills play important role for economic growth, export-import gap and BOP stability of the
country as well as socio-economic development. This study mentioned that Pakistan Steel mills has faced many
losses in recent decade. In addition, high employee’s ratio, poor infrastructure and minimum growth contribute to the
deteriorating Pakistani mills.

The Pakistan Steel Mills Corporation,[2][3] colloquially referred to as Pak Steels, is a Pakistan State-

owned company that produced long-rolled steel and heavy metal products in the country. [4]
Headquartered in Karachi, Sindh, the PSMC is currently the largest industrial mega-corporation in
Pakistan, having a production capacity of 1.1–5.0 million tonnes [5] of steel and iron foundries.[4] Built
with extensive contributions from the Soviet Union in the 1970s, it is among the largest industrial
mega-corporation complexes,[6] vastly expanded in an enormous dimension with construction inputs
involving the use of 1.29 million cubic meters of concrete and 5.70 million cubic meters
of earthworks, as well as containing approximately 330,000 tonnes of heavy machinery, steel
structures and electrical equipment.[4]
A controversial attempt was made to privatize the steel mills to global private ownership under the
counter-measure Privatization Programme of Prime Minister Shaukat Aziz.[7] However, these efforts
were thwarted by the Supreme Court in Islamabad.[8] In spite of its enormous size and expansion,
only 18% of the corporation's capacity was in use, which prompted the PSMC to request a bailout
plan of ₨. 12 billion to prevent its closure;[9] the bailout plan was dismissed by the Government of
Pakistan.[10] Finally, the steel mills was brought back to government ownership and management
under an inverse counter-measure Nationalization Programme[11] of Prime Minister Yousaf Raza
Gillani. Since then, its operational plant capacity has reached 30%–50 [8]% after seeking the
government's financial assistance. One of the key reasons for PSM's downfall is widespread
corruption after 2008 in management and CBA leaders, political recruitments, awarding of
promotions and major posts on the basis of favoritism .[11]

Employee layoffs[edit]
In June 2020, the Government of Pakistan decided to lay off 9,350 employees of Pakistan Steel
Mills.[12] In November 2020, Pakistan Steel Mills sacked 4,544 employees, including divisional and
assistant managers, due to its cost reduction exercise. At one stage during its lifetime, the PSM had
30,000 employees which has now been reduced to an estimated 9,000 employees out of which
many employees had retired.[13]

History[edit]
Main articles: Pakistan–Soviet Union relations and Pakistan Council of Scientific and Industrial
Research

After the creation of Pakistan in 1947, the Government of Prime minister Liaquat Ali Khan realized
the importance of the local production of iron and steel. Initially, the dependence on imports caused
economic setbacks to the state in the form of high import costs. The initial idea and studies were
conceived by the Council of Scientific and Industrial Research (PCSIR) and put forward the concept
to the Five-Year Plans of Pakistan (1955–1960). In 1956, Soviet premier Nikolai Bulganin offered
technical and scientific assistance to Prime Minister Suhrawardy regarding the steel mills and
expressed interest in establishing the country's first steel mills. [14]
The project was comprehensively debated in the governments of Prime Minister Huseyn
Suhravardy and President Ayub Khan. The manufacturing process, supply sources of the requisite
machinery and raw materials, plant site, domestic ore versus imported ore, ownership pattern,
product mix and all foreign financing credit kept the project on hold for a considerable time. [4]
After 20 years of policy development and studies of PCSIR, President General Yahya Khan gave the
approval of the recommendations of the state-owned scientific think tank, the Council of Scientific
and Industrial Research.[4] Bureaucrats and scientists agreed upon a unified decision that the
"Karachi Steel Project" would be sponsored in the state-public sector, under which a separate
corporation sanctioned by the Companies Act, would be formed. [4]
In pursuance of this decision, the Pakistan Steel Mills Corporation Limited (PSM Ltd.) was
commissioned and incorporated as a private limited company in a public sector in accordance with
the Companies Act of 1913, to be established in Karachi, Sindh Province of Pakistan.[4] Contacts
were made with the United States but the U.S. government showed lack of ambition and interest in
the project; therefore the studies were sent to the Soviet Union, which took the initiatives.[15] The
United States refused to give any kind of assistance.
Finally, an agreement was reached with the V/O Tyaz Promexport of the Union of Soviet Socialist
Republics (USSR) in January 1969.[4] In 1971, Pakistan and the Soviet Union finally proceeded to
enter into a government agreement, upon which, the Soviet Union agreed to provide techno-financial
assistance for the construction of a coastal based integrated steel mill at Karachi. [4]

Labour development[edit]

Pakistan Steel Mills listing with the nation capable to

produce steel (10-50Mn tonnes of steel) and iron foundries locally

In 1956, Krupp industries of West Germany offered to set up a steel mill based on Kalabagh iron ore,

coal and most other minerals available within about 18 kilometres (11 mi). The project was
dismissed by the Ministry of Energy led by its minister Zulfikar Ali Bhutto who accepted the Soviet
studies instead as Bhutto favored the idea to establish one single enormous steel mill based 100%
on imported steel and iron ore instead of local ore at Kalabagh District. In June 1966, another West
German steel firm, the Salzgitter AG, produced ~5,000 tonnes of quality steel from 15,000 tonnes of
Kalabagh iron ore in the presence of some international experts, and sold it to Volkswagen. The
company offered in August 1967 to set up Kalabagh Steel Mill of over 0.8 million tonnes per year
capacity based on Kalabagh iron ore and imported coal at an estimated cost of Rs. 1.55Bn, including
a foreign exchange cost of Rs. 878Mn. The European banks offered loans for this project, which
confirmed the technical and financial viability of the project. All attempts were dismissed after
projects were politicized enough in the civil bureaucracy.
The Pakistan Steel Mills was established as an integrated steel mill under a programme
called Nationalization programme in the 1970s.[4] The foundation stone for this gigantic integrated
project was laid on 30 December 1973 by Prime Minister Zulfiqar Ali Bhutto. [4] The mammoth
construction and erection work of the integrated steel mill, never experienced before in the country,
was carried out by a consortium of Pakistan construction corporations under the supervision of
Soviet and Pakistani experts. Khaja Inayath Ullah was the Director of Operations & Chief engineer of
this project. (Blast furnace 1&2 & RMPP)
The main production units were constructed with a host of infrastructure facilities involving
unprecedented volumes of work and expertise.[4] Component units of the steel mill numbering over
twenty and each a big enough factory in its own right were commissioned as they were completed
between April 1981 to August 1985, with the coke ovens and byproducts plant coming online first
and the galvanizing unit last.[4] The commissioning of Blast Furnace Number 1 on 14 August 1981
marked Pakistan's entry into the elite club of iron and steel producing nations. [4] The project was
completed at a capital cost of Rs. 24.7Mn. The completion of the steel mill was formally launched by
President General Zia-ul-Haq on 15 January 1985.[4]
Soviet scientist Dr. Mikhail Koltokof flew to Pakistan and settled in the country to provide training to
Pakistan's technical staff. Engineer Niaz Muhammad and materials scientist Wahab Siddiqui
received training in Soviet Russia and trained thousands of scientists and technical staff. Their
inspirations and innovations led them to earn the highest award from Pakistan, and also from the
Soviet Union. The Government of Pakistan conferred them with Pride of Performance.

Dividends and business assets[edit]

Pakistan Steel Mills not only had to construct the main production units for 2.2 MTPY, but also a host
of infrastructure facilities involving unprecedented volumes of work and expertise. [4] Component units
of the steel mills numbering over twenty, and each a big enough factory in its own right, were
commissioned as they were completed between 1981 and 1985, with the Coke Oven and Byproduct
Plant coming on stream first and the Galvanizing Unit last. Commissioning of Blast Furnace No.1 on
14 August 1981 marked Pakistan's entry into the elite club of iron and steel producing nations. The
project was not completed at a capital cost of Rs. 24,700 million and commissioned for production of
1.1 MTPY.[4] Due to its infrastructure and enormous expansion capacity, it is difficult to determine the
current value of assets of Pakistan Steel Mills,[16] while others approximating the business assets
reaching to then range from Rs. 72.5Bn to Rs. 100Bn of total value. By estimating, including
the heavy machinery, dividends, facilities, and external and internal assets, the market price of the
land of the Steel mills are exceeding the amount of Rs. 125.5Bn, as per the government estimates
against the market value of Rs 945 billion as on 2006 investigation by potential bidders who
withdrew from the bidding process for reasons not known. [16]
The completion of the steel mill was forced to stop due to liquidity crises and formally launched after
12 years by the then-President of Pakistan General Muhammad Zia-ul-Haq on 15 January 1985.
Pakistan Steel today is the country's largest industrial undertaking, having a production capacity of
1.1 million tonnes of steel and not completed to its lay-out design of 2.2 MTPY in a period of 40
years (1973 to 2013).[4]

Headquarters and production expansion[edit]

Pakistan Steel Mills is one of the most enormous and gigantically expanded industrial complexes in
the country that is located at a distance of 40 km Southeast of Karachi at Bin Qasim near Port
Muhammad Bin Qasim.[4] It was found to be an ecologically preferable location, alongside a tidal
creek and having a wind direction away from the city of Karachi. [4]
Pakistan Steel Mills is spread out over an area of 7,550 hectares (18,660 acres) (about 75 km2 or
29 sq mi) including 4,205 ha (10,390 acres) for the main plant, 3,266 ha (8,070 acres) for the
township and 81 ha (200 acres) for the 110 MG water reservoir.[4] In addition it has leasehold rights
over an area of 3,043 ha (7,520 acres) for the quarries of limestone and dolomite in the Makli and
Jhimpir areas of Thatta district.[4] It is one of the largest industrial complexes in Pakistan as well as
in South Asia and due to its enormous expansion, the steel mill has its own educational facilities
(see Pakistan Steel Cadet College and Pakistan Steel Institute of Technology), housing and
residential programmes, parks and recreation facilities and police services apart from the provisional
authorities.[4]

Environmental records[edit]
Main article: Steel Town (Karachi)

A park in Steel Town.

Due to its importance, the steel mills followed strict environmental policies regulated by
the Environmental Protection Agency (EPA) of the Ministry of Environment (MoE).[17] All health safety
and healthy working environment is continuously regulated under a designed system. Pakistan Steel
Mills, besides its core activities, has done a lot in making the environment in and around Pakistan
Steel green and beautiful through the addition of three unique projects; the Quaid-I-Azam Park; The
Quaid-I-Azam Cricket Park; and the Quaid-I-Azam Beach. The Quaid-I-Azam Park, which spreads
out over an area of 18 ha (45 acres), consists of a series of six interconnected lakes, lush green
lawns and grassy terraces, colorful flower beds, fountains, life-size steel-made models of wild and
marine animals, a jogging track, a bird sanctuary and mini-zoo, as well as a children's play and
recreational ground and boating facilities.[18] The steel mill is also active in sports development and
also has a football team Pakistan Steel FC that currently competes in the Pakistan Premier League.
[18]

Privatization of steel mills[edit]

Main article: Third Phase, Privatization Programme

Since its foundation, the steel mills has been under the management of government-ownership and
strictly put under the close coordination of civil bureaucracy.[7] In 2006, Prime Minister Shaukat
Aziz decided to integrate the steel mills under the intensified programme, called the Privatization
Programme.[7] When the news reached the rest of the country, demonstrations and spontaneous
protests began to take place against the government of Shaukat Aziz and sparked lengthy debates
in parliament, which members of the opposition walked out of in disgust.[7]
The consortium involving Saudi Arabia-based Al Tuwairqi Group of Companies submitted a winning
bid of $362 million for a 75% stake in Pakistan Steel Mills at an open auction held in Islamabad. The
consortium including the Magnitogorsk Iron and Steel Works (Russia); the al-Tuwairqi Group of
Companies (Saudi Arabia); and the Arif Habib Securities (Pakistan) paid a total Rs. 21.6 billion
($362 million), or Rs. 16.8 per share, to take control of Pakistan's largest steel manufacturing plant.
[7]
 Tuwairqi Group of Companies, one of the leading business concerns in Saudi Arabia, also
launched a $300 million steel mills project at Bin Qasim. The group will set up Tuwairqi Steel Mills
(TSM), a state-of-the-art steel-making plant in the southern port city of Gawadar, Pakistan.

Controversies[edit]
The entire privatization programme of prime minister Shaukat Aziz came to a halt when the WATAN
PARTY filed a petition under section 184 (3) through its Chairman Barrister Zafarullah Khan in
the Supreme Court of Pakistan vide SMC No. 9/2006 against the privatization citing irregularities in
the process which was accepted by the Chief Justice of Pakistan Justice Iftikhar Chaudry.[8]
The Supreme Court on 8 August 2006 held that the entire disinvestment process of the Pakistan
Steel Mills reflected haste, ignoring the profitability aspect and assets of the mills by the financial
adviser before its evaluation.[19] The transaction was the outcome of a process reflecting procedural
irregularities, said the 80-page judgement in the PSM case. [19]
On 23 June, a nine-member bench of the Supreme Court had annulled the sale of the country's
largest industrial unit to a three-party consortium and had directed the government to refer the
matter to the Council of Common Interests (CCI) within six weeks. It had declared the $362 million
transaction with the Russian-Saudi-Pakistan investors as null and void. [19] This was a highly
controversial decision, as PSM was suffering losses over the last few years and with the federal
government unable to put in the required funds to revive PSM, privatization was a prudent decision.
Chief Justice Iftikhar Muhammad Chaudhry's tenure was very controversial as CJ of Pakistan's
Supreme Court as he also made several other controversial decisions which are still adversely
effecting the country even after his retirement.
Authored by Chief Justice of Pakistan Justice Iftikhar Mohammad Chaudhry, the judgement said the
entire exercise reflected haste by the Privatisation Commission (PC) and the Competitive Committee
on Privatisation (CCP).[19] The PC had processed 30 March final report of the financial adviser the
same day and a meeting of the PC board and a summary had also been prepared the same day
when a six-week time was mandatory to examine and fix a fair reference price for approval by the
CCOP.[19]

Nationalization[edit]
Main article: Third Phase, Nationalization Programme

PSM was deliberately destroyed by successive Governments to benefit the private sector Steel
Mafia allegedly involved in more than $12 billion from 2005 to 2022 but persons at fault
(beneficiaries & their facilitators in power corridors) remained unaccountable as yet. The privatization
had the disastrous effects on steel mills, and it was lost by the private sector due to their inability to
run such giant large-scale operations of steel mills. [19] Under the private sector, the steel mill suffered
losses in its net worth and declining of production capacity. The Economic Coordination
Committee (ECC) was forced to approved a bail out package after the private sector, the Tuwairqi
Steel Mills pulled off its investment from steel mills and instead established another steel mill
industry to compete against the steel mill. [19]
Despite all its problems, the steel mills is a paradigmatic employer and would rather see itself run
into the ground than mistreat its long standing employees. [19] In the midst of all the troubles that it is
facing, the mill started issuing letters confirming their jobs and started producing the heavy steel and
iron materials.[19] After leading to an infernally long protest and inability proved by the private sector,
the government of Prime Minister Yousaf Raza Gillani activated the nationalization programme after
accepting the recommendations, despite protests lodged by the Finance minister Abdul Hafeez
Shaikh.[11]
In 2011, the steel mill was put under the management of government-ownership, expanded and re-
structured. The board of directors would be restructured and expanded, from the current nine to
twelve members as well as approving another bail out plan. [11] In a matter of weeks, the private-
sector voluntarily handed over the operations of steel mills to government-ownership management, a
move that was widely appreciated in public society and workers' unions. [11] Since coming under
government-ownership, the steel mills infrastructure and available capacity was restructured and
expanded.[20] In 2012, Ukraine announced to provide technological development and help in the
restoration of raw materials supply chain after viewing the performance of steel mills. The Ukrainian
Ambassador quoted, "for major operational units of Pakistan Steel Mills is remarkable".[21] The
Ambassador of Ukraine Volodymyr Lakomov said that Ukraine is keen to make a business
relationship with Pakistan and the steel mill PSM will be a "symbol of friendship" between the two
countries.[21][22]

See also[edit]
 Socialism in Pakistan
 Labour Party Pakistan

References[edit]
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block". The Tribune Express, Iftikhar Firdous. Retrieved 31 May 2012. In a major blow to the
economic liberals in government, the federal cabinet decided against the privatisation of eight of the
largest state-owned companies, including Pakistan Steel Mills
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strict policies and undertaking work consistent with international standards have enabled us to meet or
exceed applicable legal requirements.
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20. ^ Our staff reporter (23 May 2012). "Ukraine to provide tech help for Steel Mills". The Nation, 23 May
2012. Archived from the original on 26 May 2012. Retrieved 4 June 2012.
21. ^ Jump up to:a b Staff Reports (23 May 2012). "Ukraine to provide tech help for Steel Mills". Pakistan
Tribune, 23 May 2012. Retrieved 4 June 2012. The Ambassador of Ukraine Volodymyr Lakomov said
that Ukraine like to make good business relationship with Pakistan and hope that PSM will be a
symbol of friendship between the two countries.
22. ^ Mirza, Iqbal (26 May 2012). "kraine envoy for establishment of joint ventures". Business Recorders.
Retrieved 4 June 2012.