Government Shifts Strategy: Plans Export Processing Zone (EPZ) on Pakistan Steel Mills Land After Privatization Falters

ISLAMABAD: Facing challenges in privatizing the financially struggling Pakistan Steel Mills (PSM), the caretaker federal government is now eyeing the establishment of an Export Processing Zone (EPZ) on the PSM’s land. With the Cabinet recently abandoning the privatization process due to a lack of investors and the hefty $1.4 billion needed for PSM’s upgrade, the government is exploring alternative options.

Sources indicate that a technical due diligence report highlighted the necessity of a $584 million investment to revive the PSM plant to its current capacity of 1.1 million metric tons per annum (mmtpa), with potential expansion to 3mmtpa requiring up to $1.4 billion.

The privatization journey, initiated in 2019, faced setbacks as interested parties withdrew due to global economic conditions and concerns about Pakistan’s macroeconomic outlook. Despite continued interest from Donghua, a single-bidder scenario raised transparency concerns, prompting the government to reconsider the privatization process.

The recent steel production technology advancements have altered industry dynamics, and valuation disparities in plant and machinery complicated fair market determination. The accumulated losses of Rs206 billion in fiscal year 2022, pending NOC issuance from SSGC, and the complexities in valuation led the government to terminate the privatization process.

In light of these challenges, the government proposes delisting PSM from the active privatization list and developing an EPZ on its land. The decision, approved by the cabinet, hands over the future course of action to the Ministry of Industries and Production, in consultation with relevant stakeholders.

This strategic shift aims to make an informed decision, avoid additional costs, ensure fairness in market valuation, and uphold transparency in the handling of PSM’s future.