Islamabad:
China seemed to be out of the race to obtain the contract for the Renaissance of Pakistani steelworks (PSM) while Pakistan and Russia signed a protocol on the question aimed on Friday to restart and extend the production of steel in the country and to mark a new chapter of Pak-Russia cooperation.
The protocol to restore and modernize the PSM in Karachi was signed by the Secretary of the SAIF Anjum industries and the Director General of Industrial Engineering LLC Vadim Velichko at the Embassy of Pakistan in Moscow, according to a statement published here.
The signature ceremony was observed by Prime Minister Haroon Akhtar Khan, Pakistan Ambassador to the Russian Federation Muhammad Khalid Jamali and others. Khan is currently visiting Russia with the mission of asking for help for the Renaissance of the PSM.
“The revival of the PSM with the support of Russia reflects our common history and our commitment to a stronger industrial future,” Khan said, according to the press release. He said the PSM was originally built with the help of the former Soviet Union in 1971 and had remained a lasting symbol of Pakistani-Russia.
The PSM began to collapse in 2008. A major reason for the failed of the factory was thousands of new appointments, the global recession as well as other factors. The PSM recorded a loss of RS16.9 billion in 2008-2009, which jumped at Rs118.7 billion in five years.
The successive governments of the Pakistani peoples’ party (PPP) and Pakistan Muslim League-Nawaz (PML-N), which had been in power from 2008 to 2018, had failed to manage this industrial giant effectively, whose financial misfortunes continued due to high losses.
Later, the Pakistani government Tehreek-e-insaf (PTI) launched an initiative to relaunch it, triggering a race between China and Russia to obtain the contract. Initially, the PTI government was tilted towards China and had started negotiations with a Chinese company, but talks could not materialize.
The Russians, on the other hand, said that since the project had been built by them with Russian technology; Therefore, they were in the best place to find a solution to the problems of the sick unit and will catch up again.
The PSM experienced a cumulative benefit of 9.54 billion rupees until 2007-08 of Rs 2007-08 during the mandate of the president of the time, Pervez Musharraf. Over the next 10 years, its losses have continued to inflate, reaching 200 billion rupees at the end of its mandate on May 31, 2018.
Crunch of liquidity in the country, the import of steel products at lower prices and the closure of production units due to gas failures were among the main disadvantages with which the PSM was confronted. A flow of cheap steel imports from China has also created obstacles in terms of fluid operation of the PSM.
At a meeting of the Economic Coordination Committee (ECC) on March 19, 2016, officials of the Ministry of Industries considered that the Pakistani -Chinese (ALE) free trade agreement – in force since 2007 – was responsible for the financial collapse of the PSM.
During the mandate of the PML -N government, a bailout of 18.5 billion rupees was approved and the Ministry of Industries was responsible for increasing the use of the PSM capacity to 77% – the profitability threshold – by January 2015 so that it can be sold.
