Raping Pakistan Steel Mills

Pakistan Steel Mills is incurring heavy losses with government least bothered about its plight. (Photo via Pakistan Steel Mills)

Employing more than 40,000 workers, Pakistan Steel Mills (PSM) was a gigantic force-multiplier for employment downstream indirectly contributing to the national economy. Once a prized asset, the PSM now resembles a black hole and a burden on the economy, successive governments failing to capitalize on its potential. When Lt Gen Sabeeh Qamaruzzaman took over as Chairman PSM in Jan 1992 it was overstaffed, labor unions supported by political parties were a challenge to the management. Curbing union activities, the first savings Lt Gen Sabeeh effected were in overtime, incentive, medical, transport, etc. Within 18 months, he brought down total expenditures from Rs 223 million to Rs 165 million per month. In 1994 the mill ran at its highest ever production capacity of 95%, producing 1.04 million tonnes of steel that year. Despite Lt Gen Sabeeh’s successes, the upgradation endeavor failed because of poor contractual obligations and safety barriers with the Russian company entrusted to undertake the contract. By 1999 this vital project slid into anarchy.


In May 2006 PSM’s privatization by a consortium led by Saudi Arabia Al Tuwairqi Group was reversed by the Supreme Court (SC) after protests by PSM employees, its unions and segments of civil society on grounds that the selling process was hasty and ignored profitability.    PSM’s freefall really started with the PPP govt coming into power in 2000 and the appointment of the most corrupt Chairmen ever, Usman Farooqi the brother of Salman Farooqi, a very close aide (Secretary General) to ex-President Asif Zardari. The already depleted resources were pushed to a point of no return through wholesale plunder and scavenging, the proceeds of corruption going to political benefactors using tainted officers, suppliers and vendors within PSM. Violating all norms of the pre-procurement regime, contracts were signed with suppliers on exorbitant costs creating opportunities for kickbacks and commissions.


According to an Aug 19, 1996 article in The Washington Post “Beleaguered Benazir Bhutto” jointly written by Kenneth J. Cooper and Kamran Khan, “Last November, Bhutto promoted Usman Farooqi to be Chairman of Pakistan Steel despite evidence he had forged his educational certificates and purchased fake business and doctoral degrees from an unaccredited college in the United States. An internal investigation by Pakistan Steel in 1993 found that Farooqi had not earned a college degree but completed his higher education at technical schools in London and Pakistan. In the first eight months of Farooqi’s stewardship of Pakistan Steel, he made below-market deals that cost the state-run company about $140 million, according to two reports by its top executives. In January, for instance, the steel company lost $6 million by selling one of its prime products at more than one-third below the prevailing price. In May, the firm purchased five precision instruments from a Karachi supplier for more than $700,000 when the going rate was about $4,000.” Unquote.


The National Accountability Bureau (NAB) undertook twenty-three inquiries particularly of the Usman Farooqi era from which eighteen references were prepared for the misuse of authority. Finally convicted to seven years rigorous imprisonment (RI) and disqualified for 21 years in two references, he entered into plea-bargain with two references, surrendering assets worth in excess of Rs. 330 million that he acquired illegally. He was somehow able to get bail after which he was neither seen nor heard from, managing to escape incarceration. Without someone with powerful connections helping him, he could not flee the country while still on bail with criminal cases against him. If he was in Pakistan why did the authorities not find him? How he has escaped attention for many years remains a mystery. What was the quid pro quo?


Combination of four-pronged strategy revolving around offloading shares, handing over management control, divestment and selling assets can be effectively applied to attract potential contenders for privatization of PSM. The restructuring, however, emerges as a necessity to ensure post-privatization viability. The pluses like the exponential real estate value of PSM due to its location and skilled manpower do place it at a better bargaining position for privatization as regards value to money is concerned. The employees’ laid off package has to be attractive to avoid politicisation of the issue in the election year.


After the plunder done by Farooqi, efforts to turn around PSM’s fortunes failed. Lt Col Muhammad Afzal Khan who took over in 1999 did manage to achieve a bit of success but he died prematurely. Lt Gen Abdul Qayyum took over the PSM that was still tainted with charges of corruption and in a state of disrepair due to bad management and lack of capital investment. Qayyum did excellent work managing to clear it of debts and to his credit signed an agreement with Transparency International (TI) to remove any stigma of corruption associated with the organization but because of aging units and very poor maintenance, the process of its downward slide could not be prevented.


The NRO rescued many culprits involved in plundering PSM and accumulating wealth beyond known sources of income. Annulled by the Supreme Court (SC) as violating the Constitution but the NRO’s beneficiaries continued enjoying and subsequently were even able to manage their cases through friendly NAB prosecution.  NAB announced in Dec last year it would “conduct a detailed inquiry into the PSM’s collapse to identify those responsible and to ascertain whether or not its collapse was part of any conspiracy”. Since June 2015 all operations in PSM have shut down, it is incurring a loss of approx Rs. 1.4 billion each month. When the incumbent PML-N govt assumed power in 2013, PSM losses and liabilities stood around Rs. 200 billion.


If one were to focus responsibility, as the person most responsible for bringing about the downfall of Pakistan’s largest and extremely profitable industrial unit, Usman Farooqi could not manage to evade NAB without somebody influential hiding him. Held accountable Usman Farooqi would have been a timely example for others to heed. The question is, who was hiding Usman Farooqi, and what was the consideration? The morally depraved person who thus helped Farooqi erode justice thus caused great loss to Pakistan is still influencing decisions in the corridors of power. The real question is, does NAB have the commitment to hold this morally despicable scoundrel accountable for his baser urges, are we resigned to this conspiracy of silence? That is the crux of the problem, what is the personal motivation of a very powerful bureaucrat continuing to protect this time-bomb ticking at the heart of future investment in Pakistan?

The writer is a defense and security analyst.

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