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The demise of Pakistan Steel Mills

Updated Oct 31, 2016 06:53pm

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The entrance to Pakistan Steel Mills | Photographs by Mohammad Ali, White Star
The entrance to Pakistan Steel Mills | Photographs by Mohammad Ali, White Star

On the far-east side of Karachi’s coast, the wind is always strong. Except that on a recent day in August, not a leaf is stirring. The ride on a road that branches off Karachi Thatta National Highway and leads to Pakistan Steel Mills is as suffocating as it is bumpy.

Right where the road enters the vast premises of Pakistan Steel Mills, a verse from the Quran is displayed on a billboard: “And we have sent down iron, wherein is great military might and benefits for the people.” A few feet away, close to 25 men can be seen sitting under a shamiana — they have been staging a sit-in here since August 3, 2016.

Right next to them is the Mills’ main entrance, named after Muhammad Ali Jinnah. Behind it lies 19,000 acres of land that houses various constituent parts of Pakistan Steel Mills: 20 different plants, including a thermal power station, forklifts, warehouses, conveyor belts, railway tracks, stockyards.

Dozens of industries, including vehicle manufacturing factories and a steel mill, are located on a part of the same land. They were originally meant to draw their raw materials from Pakistan Steel Mills. No machines whir, no plants hum, no furnaces radiate inside the Mills.

All 20 of its processing plants are shut. In an area fenced off to block entry without permission, 5,000 tonnes of rusted metal sits untouched — or so it seems. This was produced when the plants were running.

Operational furnaces produced so much heat that no one could walk underneath them without protective gear. Now, they look like museum pieces.

An insulated two-way conveyor belt – about 4.5 kilometres long – appears to be in perfect shape, even though it has not moved an inch for over a year. It used to carry raw material such as coal and iron ore from the docks at nearby Port Qasim and transported manufactured goods to the port. Its insulation ensured that those materials were not exposed to the elements and their surface temperature was maintained at a desirable level — a marvel of technology and architecture.

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Large deposits of iron ore lie in an open yard. Amidst them sits a giant Soviet-era forklift. It is under maintenance. A similar contraption in the empty coal yard looks like it is still in the middle of finishing its last task.

These machines are capable of shifting 1,000 tonnes of coal or iron ore in one hour from the yards to the conveyor belt that then carries them to different plants. Something written in Cyrillic script appears right on top of them. When these machines were operational, they kicked up a storm of dust so thick that no one could see them from a distance.

Twelve railway coaches are parked inside a wagon shop. They once fetched molten iron ore from one part of the Mills to another. They are regularly maintained and can be put back to work at short notice.

Two blast furnaces at the Iron-Making Department stand idly, held steady by their frames. The giant ladles that once shifted processed iron ore from the furnaces onto the railway coaches stand motionless and empty — like the outstretched hands of a beggar.

Inside Pakistan Steel Mills
Inside Pakistan Steel Mills

The smell of gas that once fuelled the furnaces still pervades the environs. Insulation around the pipes that carried gas, compressed air and water to the furnaces is coming off. When the department was functional, this insulation required continuous maintenance.

Operational furnaces produced so much heat that no one could walk underneath them without protective gear. Now, they look like museum pieces, with onlookers inspecting them from all possible angles, without the fear of any hazard or harm.

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The Mills has an integrated structure. All its plants and machines work in tandem. If one of its parts closes down, the rest also comes to a standstill. When the Mills shut down on June 10, 2015, it was not the result of any of its parts going out of order and gradually closing down the rest of the production process. Instead, all the plants and machines were shut down abruptly, at once.

It was, however, not entirely unexpected. The Sui Southern Gas Company (SSGC), that supplied natural gas to the Mills, had been demanding that its bills of nearly 35 billion rupees be cleared. After sending a final notice to the management of Pakistan Steel Mills early last summer, SSGC cut off the gas supply, bringing Pakistan’s largest steel producer to a sudden halt.

An eerie silence surrounds Pakistan Steel Mills today. Its machines and plants – that have the capacity to produce close to 1.1 million tonnes of steel in a year – run the risk of becoming permanently dysfunctional if they do not start running again soon. The longer they remain turned off, the costlier it will be to reboot them.

The master plan for Karachi Steel Mill Township
The master plan for Karachi Steel Mill Township

Management officials at Pakistan Steel Mills are waiting for a miracle that sets it rolling again. They are waiting for an injection of money from the federal government to pay outstanding salaries and other dues of former and working members of the staff. They are waiting for a missive from the Privatisation Commission. They were told that the financial adviser appointed by the commission to supervise the sale of the Mills to some private buyer would soon contact them. Many weeks have passed since that information reached them, but they have not received a single phone call or a letter with the latest updates.

They are not even sure if privatisation will ever go ahead, at all.

This ‘nothing happens’ state of affairs did not develop overnight. It has been almost 20 years in the making.

On May 29, 1997, the Council of Common Interest (CCI) approved the Mills’ privatisation because, according to a petition filed at the Supreme Court, “it could not prove to be a commercially viable project”. Immediately after the approval, however, the government started having second thoughts. It dropped the idea of privatisation and, instead, decided to reform the Mills’ financial and management structures to make it profitable. The restructuring was made possible by hefty injections of money (secured by the government as loans). The move worked and the Mills started earning profit 2002 onwards.

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Audited accounts confirm the improvement. In 1999-2000, the Mills made an annual loss of 1.141 billion rupees, taking its total accumulated losses to 9.326 billion rupees. By 2005, the accumulated losses were all gone. On the other hand, the Mills had an accumulated profit of 4.866 billion rupees.

The production capacity also increased in that period: from 76 per cent in 1999-2000 to 86 per cent (in 2000-2001); 81 per cent (in 2001-2002); 92 per cent (in 2002-2003); 94 per cent (in 2003-2004) and 89 per cent (in 2004-2005).

Management officials at Pakistan Steel Mills are waiting for a miracle that sets it rolling again.

On April 11, 2005, the Cabinet Committee on Privatisation again decided to privatise Pakistan Steel Mills. In light of this decision, the government published newspaper advertisements, inviting Expressions of Interest from parties interested in acquiring the Mills. Sometime later, 19 parties applied, seeking approval for their qualification to partake in the privatisation process. These included Al-Tuwairqi Group (Saudi Arabia), in partnership with Arif Habib Group (Pakistan), and Magnitogorsk Iron and Steel Works (Russia).

During this time, the government appointed Citi Group as the financial adviser to evaluate the assets of Pakistan Steel Mills. The adviser submitted its evaluation report to the Privatisation Commission, which deliberated upon it and also took into consideration the replacement cost of some of the machinery. The commission then suggested that the total worth of the Mills stood at 500 million dollars.

A man makes his way down from one of the blast furnaces at Pakistan Steel Mills
A man makes his way down from one of the blast furnaces at Pakistan Steel Mills

Based on this calculation, the price for 75 per cent stake in the Mills was put at 375 million dollars. Since one US dollar at the time was equal to 60 rupees, the price of a single share in local currency was calculated to be 17.43 rupees (the total number of shares being privatised was 1,290,487,275).

When the Cabinet Committee on Privatisation went through these statistics, it revised the shared price downwards at 16.18 rupees.

The Arif Habib Group and Al-Tuwairqi Group – two of the parties the government qualified to take part in the privatisation process – formed a consortium to offer a joint bid for the purchase of shares. Magnitogorsk Iron and Steel Works also joined the consortium on the day the bids were to be made. This consortium, according to the petition filed at the Supreme Court, offered to pay 16.80 rupees per share, a price higher than those offered by their competitors.

The government accepted the offer and issued a letter of acceptance on March 31, 2006. The successful bidders signed an agreement with the government representatives on April 24, 2006. They were all set to take over the Mills.

Except that it never happened.

Days before the letter of acceptance was issued, a little-known group, Wattan Party, and Peoples Workers Union (the elected trade union representative of the Mills’ workers at the time) challenged the privatisation before the Sindh High Court in Karachi. The petition claimed that there were “omissions” during the privatisation process and that the Mills was being sold at a “throwaway” price of 21.68 billion rupees.

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The Sindh High Court referred the petition to the Supreme Court on March 30, 2006. The apex court examined the privatisation process over the next few weeks and declared the letter of acceptance as null and void on June 23, 2006.

This was the first time, according to Mohammad Zubair, the current head of the Privatisation Commission, that the privatisation process of a government-owned entity was completed and then reversed by the Supreme Court.

When Iftikhar Muhammad Chaudhry, the chief justice of Pakistan at the time, took the decision against the privatisation of Pakistan Steel Mills, it seemed like a victory for the workers. Later, events would suggest that it was a pyrrhic one.

Zubair says 2006 was the best time to privatise the Mills. Today, it is in the worst possible shape, he says, making its privatisation a very slow process, with little interest being shown by prospective buyers. The Mills, for instance, ran at only six per cent of its production capacity between 2013 and 2014. Its accumulated losses reached 118.529 billion rupees by the end of the 2013-2014 financial year. In that year alone, the Mills made a net loss of 23.532 billion rupees.

A Soviet built machine at Pakistan Steel Mills
A Soviet built machine at Pakistan Steel Mills

The rot started much before 2014.

Many blame it on the way the federal government of the Pakistan Peoples Party (PPP) – that came to power in the first half of 2008 – handled Pakistan Steel Mills. That year, the government appointed a new chairman, Moin Aftab Sheikh, to head the Mills’ management. The same year, election for the Collective Bargaining Agency (CBA) – empowered to bargain with the management on the workers’ behalf – were held. Peoples Workers Union, a labour organisation of the Pakistan Steel Mills’ workers affiliated to PPP, won that election.

The combined impact of a PPP-appointed chairman and the victory of its affiliated union as CBA was far from benign. The two sides, instead of keeping an eye on each other as they ideally should, seemingly joined hands to the detriment of the Mills.

The alleged collaboration between the chairman and the CBA has been recorded in a corruption case registered in 2010. The case was in “respect of award of Canteen contract wherein it is alleged that Mr Moin Aftab Sheikh…in connivance with other accused persons fraudulently scrapped the already floated tender.” This, according to the National Accountability Bureau (NAB), caused a loss of 81.041 million rupees. One of the co-accused in this case is Shamshad Qureshi, the chairman of the CBA.

Even otherwise, Sheikh’s tenure was extremely controversial. All kinds of allegations swirled around him. In 2009, a case was registered against him and three others for causing a loss of 49 million rupees to the Mills. He was alleged to have “fraudulently manipulated a spot purchase of 50,000 [metric tonnes] of coal” from Australia “on highly-inflated price and on extremely higher freight rates despite declining market rate.”

The combined impact of a PPP-appointed chairman and the victory of its affiliated union as CBA was far from benign.

The same year, Sheikh, along with a few others, was booked in another case. This pertained to the “manipulation” in the acceptance of 40,000 metric tonnes of metallurgical coke, which “arrived from China … without opening of [Letter of Credit] or obtaining necessary permission … on highly-inflated price and on extremely high freight rates resulting in loss of 1 billion rupees…”

Again, in 2009, he was among those who had allegedly manipulated “10 shipments of coal” from Australia and Canada on a “highly-inflated price and extremely high freight rates, causing loss of billions of rupees”.

In a case registered in 2010, Sheikh was among 13 individuals who had caused “wrongful loss” to the public exchequer “to the tune of millions of rupees regarding the sale and purchase of various finished products, including billets". A 2012 case accused him and 26 others of collusion that “caused wrongful loss” to Pakistan Steel Mills in “sale/purchase of various finished products”.

Sheikh’s alleged involvement in large-scale corruption also allowed his subordinates to pocket public money at will. In one of the four other major cases of corruption pertaining to his tenure, the senior management staff at the Mills caused a loss of 3.65 billion rupees by selling 49,000 metric tonnes of steel billets below market prices. In the second case, senior members of the management “extended illegal benefit of 90 days free credit without mark-up to Amrelli Steels Limited” in Karachi.

The third one was regarding the violation of Pakistan Steel Mills’ rules (which state that the same company cannot be a trader and a consumer dealer) by two traders who, in connivance with the Mills’ management, sold products they had purchased as consumer dealers in the open market. The last case makes the same allegation against the representatives of Gujrat Steel Private Limited who sold products they had purchased from Pakistan Steel Mills for four of their registered consumers. Their main accomplice from among the management was one Ghafoor Pathan, who worked as deputy manager of Customer Service Marketing at the time.

Pakistan Steel Mills workers head home after their day shift
Pakistan Steel Mills workers head home after their day shift

These cases were registered after the Supreme Court took suo motu notice of the allegations of corruption at Pakistan Steel Mills. The court directed the Federal Investigation Agency (FIA) to investigate those allegations. The public furor over stories of corruption in the Mills led the then Prime Minister Yousuf Raza Gilani to sack Sheikh on August 18, 2009.

Those responsible for investigating plunder at Pakistan Steel Mills, however, have failed to move briskly enough to ensure the prosecution and conviction of those involved. Three years after the Supreme Court gave the FIA the task of investigation, the judges became unhappy with the agency’s progress. “We do not find any serious effort on the part of the FIA towards prosecution of the cases,” they declared.

In 2012, they handed over the investigation to the National Accountability Bureau (NAB), which, too, has failed to achieve any results. While forwarding the cases to the NAB, the Supreme Court had ordered it to take action within three months. More than three years later, that order exists more in disregard than in compliance.

In June of this year, the Ministry of Industries and Production in Islamabad sent a letter to the NAB, calling for the “latest/updated compliance report for the cases … pending with NAB.” The letter has elicited no response so far.

Even when anti-corruption institutions have failed to bring the corrupt to justice, the data vividly paints the disaster their activities wreaked on the Mills. In the financial years 2006-2007 and 2007-2008, it was running at a capacity of 82 per cent and 89 per cent, respectively. Its net annual profit stood at 3.159 billion rupees in 2006-2007 and at 2.081 billion rupees in 2007-2008. In the following year, there was a massive reduction in its production capacity, which fell to 65 per cent. The Mills incurred a loss of 26.526 billion rupees in 2008-2009.

While forwarding the cases to the NAB, the Supreme Court had ordered it to take action within three months. More than three years later, that order exists more in disregard than in compliance.

Avais Hyder Liaquat Nauman, an audit firm that the Mills’ management engaged on the orders of the Supreme Court to gauge the impact of Sheikh’s tenure, made startling revelations: Pakistan Steel Mills suffered a loss of 9.99 billion rupees due to corrupt practices in that year; mismanagement and negligence caused a loss of 11.84 billion rupees; and business losses stood at 4.68 billion rupees.

If Pakistan Steel Mills had not lost those 26.526 billion rupees under Sheikh, that money could have been sufficient to pay around 2.04 million rupees to each of the Mills’ 13,000 employees awaiting salaries.

But even after Sheikh had left, the situation at the Mills went from bad to worse. Between August 2009 and July 2013, five people successively served as chairman of Pakistan Steel Mills — three of them held that position only in an acting position or as an additional charge. That, obviously, had a negative impact on the working of the Mills.

In 2009-2010, its production capacity dropped to 40 per cent; in 2010-2011, it fell further to 36 per cent. By the end of 2012-2013, it had dipped to as low as 14 per cent. The Mills’ accumulated losses at the time stood at a massive 94.997 billion rupees.

In a span of only six years, between 2007 and 2013, the Mills not only eroded its previously accumulated profit of 9.536 billion rupees, but also added almost 10 times as much money in losses. That means that the total money Pakistan Steel Mills lost in this period stood at a staggering 104.533 billion rupees. With that kind of money, one can buy 5,226 two-bedroom apartments in a posh neighbourhood in Karachi, each costing 20 million rupees.

The iron making department inside Pakistan Steel Mills
The iron making department inside Pakistan Steel Mills

Prime Minister Nawaz Sharif decided to resume the process of Pakistan Steel Mills’ privatisation in October 2013. It was included among 69 state-owned enterprises that the government wanted to sell to the private sector. Over the next three years or so, however, the Mills’ privatisation made little progress.

There were hurdles at every stage. Even the task of finding a financial adviser was not smooth. When the Privatisation Commission advertised in the press that it needed a financial adviser for the privatisation of Pakistan Steel Mills, no one came forward in the 30-day time frame given in the advert.

The Privatisation Commission issued another ad after three months or so. Finally, towards the end of 2014, one consortium – comprising the Pak-China Investment Bank, the auditing firm PricewaterhouseCoopers and human resource consultancy Abacus – came forward. Even though the consortium is not the best adviser that the Mills should get, the commission – according to Zubair – had no choice.

Another challenge for the Privatisation Commission was to make the Mills an attractive business for prospective buyers. Zubair decided to ask the federal government to inject 18.5 billion rupees into the Mills to improve its operational and financial status.

When he took his plan to the Economic Coordination Committee of the federal cabinet in April 2014, he explained that his goal was to raise the production capacity from zero to 60 per cent (estimated to cost nine billion rupees) and pay the long-overdue utility bills and outstanding staff salaries (estimated to cost 9.5 billion rupees). His objective was to keep the Mills in working condition until the privatisation process was completed. The committee approved his plan.

Prime Minister Nawaz Sharif decided to resume the process of Pakistan Steel Mills’ privatisation in October 2013.

It also worked — at least initially. The production capacity did pick up and reached close to 60 per cent by early 2015.

A few weeks later, came the biggest hurdle: disconnection of the gas supply shut down the Mills completely. Zubair and his Privatisation Commission have been unable to overcome that hurdle so far.

He took another route to bypass it. The Privatisation Commission organised roadshows in September 2015 in Beijing and Shanghai to attract foreign buyers for Pakistan Steel Mills. Many Chinese companies showed conditional interest. The Cabinet Committee on Privatisation also approved the structure of the privatisation transaction on October 1, 2015, showing what assets were to be privatised and how many liabilities were to be transferred to the private buyer.

While these developments were taking place, the government of Sindh showed interest in acquiring Pakistan Steel Mills. The Cabinet Committee on Privatisation directed the Privatization Commission to formally approach the provincial government to see if it was interested in acquiring the Mills with all its assets and liabilities.

By the end of April 2016, the Sindh government said it was no longer interested. It said the federal government was not willing to provide even those financial incentives that any private buyer would have gotten anyway. A report published in the daily Business Recorder said that the Sindh government had sought financial assistance from the federal government, but the latter denied that request and told the former to buy the Mills on an “as is, where is” basis.

For the next few months, the privatisation process was completely stalled. In June this year, the Cabinet Committee on Privatisation again authorised the Privatisation Commission to restart the process. A meeting was held in Islamabad on September 21, 2016, to finalise a new transaction structure. “We will go back to the cabinet committee for the approval of [the] transaction structure in a couple of weeks,” says Zubair.

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That approval will face many roadblocks. Firstly, losses are piling up, and so are the liabilities. Secondly, Zubair says, the interest shown by Chinese companies is no longer as strong as it was last year, when eight of them were ready to take part in the privatisation process. Now, only three to four of them are willing to do so. Thirdly, frustration among the employees of Pakistan Steel Mills is growing by the day over non-payment of their salaries and other dues. They want to get their money back before the Mills is privatised.

Zubair knows all this. Even the highest bid will be nothing compared to what was offered in 2006, he says. “[The Mills] is non-functional and it owes 66 billion rupees to the National Bank of Pakistan and 40 billion rupees to the Sui Southern Gas Company,” he says. Whoever buys the Mills, their ability to borrow money from banks will be limited because of this credit history, he adds.

Zubair also argues it will be a wise move to sell the Mills at whatever price it attracts. That will, at least, ensure the resumption of its operations, he says.

The first benefit of an operational Mills will be that money being given to it as a subsidy from the public exchequer will no longer be required. Secondly, the new owners will invest money to upgrade plants and machines. Thirdly, an operational Mills will absorb 8,000 to 9,000 of its existing employees, if not all of them. “We will at least save it from complete shut down,” Zubair says, considering the government does not have the resources to restart its operations.

The coke oven plant inside Pakistan Steel Mills
The coke oven plant inside Pakistan Steel Mills

Pakistan Steel Mills has not paid salaries to its staffers since May 2016. It has not paid gratuity to its former employees who have retired since May 2013 and it has failed to give provident fund to retiring staffers since 2015 (the total number of employees in these two categories is 3,000, according to a trade unionist). The Mills’ total losses and liabilities, according to one source, stand at 400 billion rupees. Its management acknowledges it is losing seven million rupees per day, even when all its plants and machines are shut down and its staffers are not being paid.

The Mills’ accumulated losses and liabilities are more than 150 per cent of the total expenditure on setting it up back in 1974. That expenditure was recorded at 25 billion rupees. That money is equivalent to 2.52 billion dollars (considering that the dollar was equivalent to 9.9 rupees in 1974). In today’s dollar prices, the Mills’ construction cost would be 264.6 billion rupees even by conservative estimates.

Back in the day, Pakistan Steel Mills was the “backbone of the nation”.

At its official inauguration ceremony on January 15, 1985, General Ziaul Haq said it was “the greatest and most precious new year gift to the nation”. Lieutenant General Saeed Qadir, then federal minister for production, declared the Mills as a “milestone on the road of economic freedom, all-around progress and national honour”.

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At the ceremony, Vitali S Smirnov, the Soviet Union’s ambassador to Pakistan at the time, said that the Mills would become a symbol of friendship between the two states. The entire funding for setting up the Mills came from the Soviet Union — some in the form of cash for constructing the buildings, roads, railtracks, conveyor belts, etc, and the rest in the form of finished products.

After the ceremony, Haq spoke to reporters and claimed that the Soviet Union had offered to set up a second steel mill in Pakistan. “We welcome this gesture and will consider it at the right time,” he said. The irony is that Pakistan, at the time, was also waging a proxy war in Afghanistan against the Soviet Union.

Metal scrap at the scrapyard inside Pakistan Steel Mills
Metal scrap at the scrapyard inside Pakistan Steel Mills

Sometime in the 1950s, Ghulam Faruque, a senior bureaucrat, established the Pakistan Industrial Development Corporation (PIDC) with the objective of promoting industrialisation, both in the public and private sectors. His corporations would arrange money and technology for prospective investors.

One of its earlier projects was building a steel mill because it was considered essential for the industrialisation of the country, says Haq Nawaz Akhtar, one of the first chairmen of Pakistan Steel Mills. The project was first proposed in the first five-year plan (1955 -1960), according to the Pakistan Steel Mills’ website.

By 1956, Pakistan had received a proposal from the Soviet Union, offering technical and economic assistance to build the proposed steel mill, says a report by the Area Study Centre, a university-based think tank in Peshawar. In April 1965, President Ayub Khan visited Moscow. Subsequently, his government decided to set up a steel mill in the public sector.

By July 2, 1968, reads an entry on the Pakistan Steel Mills’ website, “Pakistan Steel Mills Corporation was set up as a … company in the public sector in accordance [with] the Companies Act of 1913, with the objective to establish and run steel mills [in] Karachi and other parts of Pakistan.”

The following year in January, the corporation finalised an agreement with Tiajproexport, a company in the Soviet Union, “for the preparation of a feasibility report into the establishment” of a steel mill. A couple of months later, Ayub Khan had to resign.

The interest shown by Chinese companies is no longer as strong as it was last year, when eight of them were ready to take part in the privatisation process.

When Zulfikar Ali Bhutto became prime minister, he decided to set up the steel mill at its current location. He also approved the construction of Port Muhammad Bin Qasim, dedicated to fulfil the proposed mills’ logistic requirements.

Between 1972 and 1977, Bhutto visited Moscow twice. As pointed out by the Area Study Centre, there was an “improvement in economic and scientific relations” between the two countries. In 1973, a number of Soviet economic delegations and steel experts visited Pakistan. On December 30 that year, Bhutto laid the foundation stone for Pakistan Steel Mills.

By the early 1990s, however, the Mills was already showing signs of sluggish performance. Sabeeh Qamaruz Zaman was a serving lieutenant general at the time. He took over as the chairman of Pakistan Steel Mills in January 1992 and immediately embarked on a plan to cut costs. His first savings were in “overtime, incentive, medical, transport, financial expense and consumption of stores,” according to a 1994 article written by defence and political analyst Ikram Sehgal and published in The Nation, a daily newspaper. Within 18 months of taking up his job, Zaman was able to bring down the total expenses from 223 million rupees to 165 million rupees per month.

The medical expenses of employees would amount to 30 million rupees a month at the time, says a knowledgeable source. Some workers were applying for the reimbursement of their medical expenses, which were up to 25,000 rupees. Zaman set up a committee to address the issue: anyone who needed more than 5,000 rupees in medical expenses had to appear before the committee and justify the expense. The committee discovered that some employees were seeking reimbursement for money spent on cosmetics, house-building and repairing and other non-medical expenses. Within two months, the medical expenses dropped down to 10 million rupees.

Soviet built machinery at Pakistan Steel Mills
Soviet built machinery at Pakistan Steel Mills

After his retirement from the army, Zaman became one of the founding directors of The Citizens Foundation. He is now running a non-profit organisation for girls, Quality School Foundation, and lives a quiet life with his wife, children and grandchildren in Rawalpindi.

Zaman managed to run the Mills in 1994, at its highest ever production capacity of 95 per cent, producing 1.04 million tonnes of steel in that year. In order to make that happen, he had to fight the unions, the Russian staff and even the government.

He took on the Russians when they did not cooperate with him. After a Russian engineer declared a machine dead and demanded new machinery be bought from Russia, Zaman urged Pakistani engineers to rise up to the occasion and put the machine back to work. They passed the test with flying colours. He then told the Russian engineers to pack up and leave as they were no longer needed. Hundreds of them left as a result of his orders. These days only a handful of Russian engineers work at Pakistan Steel Mills.

His next target were workers affiliated with political parties.

In the early 1990s, the Muttahida Qaumi Movement (MQM) had 15 registered trade unions in Pakistan Steel Mills and a total of 600 labour activists. They considered themselves exempt from work, but got salaries and overtime regularly, along with other benefits, Sehgal wrote. Zaman also discovered that 3,800 of the Mills’ employees existed only on paper. They never came to work. He immediately removed them from the payroll. It was later discovered that their salaries went directly to Nine Zero, MQM’s headquarters in Karachi, says a source, without wanting to be named.

Incensed by his move, MQM threatened to close down the Mills as well as the city of Karachi. Under pressure from the party, Prime Minister Nawaz Sharif called Zaman for a meeting and tried to convince him to take those people back on the payroll. Zaman refused to undo what he had done. He told the prime minister that he could sack him if he liked.

Sharif, instead, decided to form a committee to tackle the situation. Before this committee could even begin its work, the government started a security operation against MQM in Karachi. Zaman never had to worry about the issue any more.

“I stopped all outside interference by the labour unions, government and political parties,” he says, in an interview conducted in his home. “All decisions were made in-house, in the interest of Pakistan Steel Mills and not in the interest of anybody outside,” adds Zaman.

An employee sits in his two bedroom house inside Karachi Steel Mill Township
An employee sits in his two bedroom house inside Karachi Steel Mill Township

Naureen Farooq remembers the good old days fondly.

A native of Faisalabad, she joined Pakistan Steel Mills as a volunteer in its education department in 1985. The schools within the area where Pakistan Steel Mills’ workers lived were only up to the primary level at the time and were not in the best of conditions. In 1987, the management set up a committee to improve the quality of education. As recommended by the committee, the management gave full-time jobs to all those working as volunteers like Farooq. That gave a big fillip to educational activities.

Today, there are 21 educational institutions in the residential part of the Mills. These include primary schools, Sindhi medium schools, degree colleges and a cadet college. There are more than 5,000 children enrolled at these institutions.

Farooq has albums containing photographs from her time as a teacher. In many of them, she can be seen standing confidently next to her colleagues and the Mills’ management. Many pictures show annual school functions, stage performances by students, visits by Chinese delegations, sports events — and greener, brighter residential blocks.

“People keep complaining about what has happened to Pakistan Steel Mills,” says Farooq, “but they never ask what part they have played in it.” An industry does not reach point zero overnight, she adds.

Farooq recalls how Muhammad Afzal, who worked as the Mills’ chairman until his untimely death in 2003, once gathered all the employees of the education department and informed them that Pakistan Steel Mills was no longer running in losses. “You can proudly call yourselves the employees of Pakistan Steel Mills, because we have finally paid off all our debts,” she quotes him as saying.

The Russian market inside Karachi Steel Mill Township
The Russian market inside Karachi Steel Mill Township

Inside Karachi Steel Mill Township, a residential neighbourhood built exclusively to house the Mills’ staff, pride in the institution is the last thing one expects. Not a leaf rustles here on a suffocating August day. The streets that divide the workers’ colony from the officers’ residences are deserted — in tandem with the stillness at the nearby premises of the Mills.

Built on approximately 715 acres of land, the township has 3,700 houses. It has its own schools, markets, recreational facilities, a dispensary, a mosque, a church and a temple. Many of the Mills’ existing and former employees live here.

The officers’ residences that dot the streets all look the same: plain, concrete blocks with two floors, each marked by circular windows. Most have unkempt lawns. The paint on their walls is wearing off.

In the workers’ colony, houses are smaller. Some do not even have doors; curtains made of discarded bed sheets block off their entrances. The streets inside the colony look like they were abandoned years ago.

Public places and main roads in the township are a different affair. On one September evening, amateur footballers and cricketers from nearby areas are out practicing their skills in the cricket grounds. The Mills’ workers can also be seen there in the evening, returning home after finishing their day’s work.

Some of them take a stroll to Pakistani Market, a strip of grocery stores and teashops, to buy items of daily use; others gather at the nearby Russian Market, once meant to cater to the Russian employees of the Mills.

“People keep complaining about what has happened to Pakistan Steel Mills,” says Farooq, “but they never ask what part they have played in it.”

Now it is almost deserted, with just a few shops open. The proprietor of one of them has reportedly sold so many groceries to the residents of the township on credit that his store appears abandoned, with empty shelves and a few items carelessly displayed.

According to some local residents, people in the township owe him as much as 5.5 million rupees. The sole reason why people are unable to pay him back is that they are no longer receiving their salaries and other dues as regularly as they should.

Taj Begum knows what living without money is like. Inside the living area of her two-bedroom, single-storey house, her economic conditions are hard to disguise. A single couch bravely tries to fill space enough for a five-seat sofa set and its accompanying tables.

It is time for the customary electricity outage. Begum’s husband, Bashir Khan, is asleep, after having worked during the night shift at the Iron-Making Department. His job involves monitoring the casting process, which requires working right next to moulds that contain liquid iron with a surface temperature of nearly 1,200 degrees Celsius. These days, he spends seven hours at work, sitting with other workers and roaming around idle machinery.

Khan and Taj Begum have been married for nearly 30 years. They have seen better times. Taj Begum remembers the time when workers received their salaries as early as the 26th or 27th of the month, rather than waiting for the end of the month. And not just salaries — bonuses, too. Today, with no salary, she is finding it almost impossible to run her household. She has no money to send her four children to college and eventually marry them off.

Retired employee of Pakistan Steel Mills, Shabbir Jumani, has been waiting for his provident fun and gratuity for nearly two years
Retired employee of Pakistan Steel Mills, Shabbir Jumani, has been waiting for his provident fun and gratuity for nearly two years

She does not complain though and wonders out loud about the families of those workers who do not live in the township and, instead, reside in rented houses.

Even when the workers get salaries, they do not know how much of it has been deducted in lieu of house rent and electricity bill because they are not being given their pay slips. Malik Waqas, a resident of the township and an employee of Pakistan Steel Mills, says his father’s salary is around 65,000 rupees — but he received only 9,000 rupees the last time. The rest was deducted under various heads.

Some workers complain that those living in two-bedroom houses are told that as much as 20,000 rupees have been deducted from their salaries as electricity bills. “An electricity bill of 21,000 rupees was deducted from the last salary I received,” says Naimatullah, an employee of the Mills. Next month, the management again deducted the same amount as the price of electricity he had consumed. “Half of my salary is going into paying for electricity. I cannot pay this amount every month,” he says.

Shabbir Jumani, 63, cannot deal with such pecuniary anxieties. On the steps of the township’s administration office, he breaks down.

He joined the Mills in 1980 and retired in December 2014 as a machinist. “I have not received a single penny after retirement,” he says. He lowers his head every now and then, trying to hold back tears.

Close to two years have passed, but he continues to wait for the receipt of his provident fund and gratuity. He does not know if he can get any other job. “I am turned away from wherever I go looking for a job because I am too old to work,” he says.

Others complain that the Mills’ management is failing to provide them health facilities at a time when they do not have the money to pay for them. Waqas, who has just returned from a visit to the Mills’ hospital, sheds light on the healthcare facilities available to the workers. “You cannot even get an X-ray done there,” he says. They have no syringes, no medicine; the doctors are there only to sign sick leaves.

Health facilities are in a dire state mainly due to rampant corruption among the management. According to a recent story published in the daily Dawn, the FIA has found enough “evidence” against the senior management of Pakistan Steel Mills to prove that it was involved in misappropriating funds worth millions of rupees meant for procurement of medicine supplies.

Medicine purchases were also “made from unregistered sellers of medicines and from ‘freelancers’ who were originally engaged in the supply of hardware, tools and general items” to the Mills, the newspaper stated on October 1, 2016.

Imran Khan's stage at a protest in front of Pakistan Steel Mills, held on September 5, 2016
Imran Khan's stage at a protest in front of Pakistan Steel Mills, held on September 5, 2016

A stage is being set in front of the Jinnah gate of Pakistan Steel Mills. Imran Khan, chairman of the Pakistan Tehreek-e-Insaf (PTI), is scheduled to arrive here to address the Mills’ workers. Before his arrival, his party’s activists grab as many PTI flags as they can and throw them towards the workers, waiting for Khan’s arrival.

Most of them are not PTI supporters. They, however, are here because they say Khan is at least showing up to express solidarity with them, unlike other political leaders who are least concerned about them. They are grateful to him.

When Khan finally arrives, he does not speak to anyone and heads straight to the stage where he sits in a chair for a while as local leaders of his party and some of the Mills’ workers deliver speeches. When his turn comes, he wastes little time in formalities and gets to the topic of Pakistan Steel Mills straight away. “This industry has been robbed,” he says to a crowd of about 150 people. “And those who have robbed it are residing as billionaires in big palaces.” The crowd erupts in agreement and cheers him on. Khan continues: “And who has paid the price for it? The workers of Pakistan Steel Mills.”

Between his speech, some in the crowd chant “Go Nawaz go”, but their slogans are drowned by his voice blaring from the speakers. It is obvious that he knows very little about the Mills. “Today, I am here with you because an industry that was making a profit of eight billion rupees in 2007 has been closed for five months.” As he pauses, someone standing behind him tries to correct him — “it has been closed 11 months,” he says. Another person corrects him again. “It has been closed for 13 months,” he intones.

In the workers’ colony, houses are smaller. Some do not even have doors; curtains made of discarded bed sheets block off their entrances.

Fajar Ahmed, 62, is sitting among the audience. He is part of a labour organisation called the Insaf Workers Ittehad. It is not affiliated with PTI or any other party. It is just another group of workers, demanding their rights through a sit-in right next to the Mills’ entrance. They have been protesting for close to two months now.

Ahmed has a large family — consisting of his wife, two sons, two daughters and his parents. He has worked at Pakistan Steel Mills for 26 years — first as a daily wage worker and, since 2010, as a regular employee. His job involves handling four different machines at the coke oven plant.

He and others in his group took out a protest demonstration outside the Mills on August 3 this year. They marched from Pakistan Steel Mills to a nearby highway, demanding the release of their salaries, improvement in medical facilities and the clearance of post-retirement dues, among other things.

The Mills’ management did not bother to heed their demands. Instead, it sent show cause notices to all those workers who had participated in the protest, asking them to explain why they had marched on to the streets — as if everything was perfectly fine with the Mills and there was absolutely nothing to complain about.

It was perhaps under pressure from such protests that Finance Minister Ishaq Dar approved the payment of salaries for the months of April 2016 and May 2016, amounting to 760 million rupees, on September 7, 2016. He also approved the payment of gratuity and provident funds for some of the retired employees, amounting to 322.021 million rupees.

Workers of Pakistan Steel Mills protest on September 5, 2016
Workers of Pakistan Steel Mills protest on September 5, 2016

In the middle of last month, Ahmed and his fellow protesters are sitting in their sit-in camp. They are discussing problems that the workers and their families are facing. One of them says some shopkeepers around the Mills have placed signboards outside their shops telling Pakistan Steel Mills workers to stay away.

The discussion then moves on to the role of the Peoples Workers Union: the CBA. A pamphlet issued by the Insaf Workers Ittehad gives details of the official vehicles being used by the CBA members — as well as the fuel and maintenance costs of those vehicles. According to a trade unionist, scrap stocked at a place called China Plant is being picked up illegally and sold at reduced prices.

But what exactly is scrap? Since the Mills is not operational, it has tonnes of raw materials or half-finished products that cannot go into the next stage of production. These products are mostly in the form of metal slabs and rolled sheets kept outdoors in stockyards. Over time, rain and dew have corroded them, leaving them rusted and making them appear like scrap.

Rehan Shah, a trade unionist and chairman of the Workers Welfare Trust, a non-profit organisation, recently wrote a letter to the Privatisation Commission after he came to know that the management of Pakistan Steel Mills had sought permission from the ministry of industries and production to sell those articles as ‘scrap’.

When the management is given permission for the sale, it sells that ‘scrap’ to private buyers at the price of “dust”, he wrote. Since there is a history of selling scrap at extremely low rates, as Shah pointed out in his letter, it is likely that the raw material and half-finished products now lying around in the Mills can one day be sold in a similar way. “The sale of scrap is a form of corruption,” Shah noted.

According to a trade unionist, scrap stocked at a place called China Plant is being picked up illegally and sold at reduced prices.

Other workers allege that a large racket is operating in the Mills to illegally transfer the raw material and unfinished products out of the Mills and then sell it at reduced rates. The workers say those involved in the theft take the materials out of the warehouses and leave them out in the open to rust. These are then loaded on to mini-trucks, which take them out of the Mills for sale. All of this, the workers allege, is taking place with the connivance of the CBA, the management and the security staff.

These allegations are almost impossible to substantiate. Firstly, it is not easy to lift those very heavy articles without cranes and forklifts. Without a concerted activity by a good number of people and without the help of machines, loading them onto trucks that then take them out of the Mills’ premises seems impossible. It must involve commotion at a scale that cannot go unnoticed. The management adds that the entrances and exits to the Mills are well-guarded and no vehicle can move in and out without official permission.

The account of at least two incidents of theft on a much smaller scale, though, can be found in a police record. On the morning of March 31 this year, various types of cable wires – including telephone cables and polyvinyl chloride wires used to make flexible tubing, upholstery and flooring – were stolen from two different stores located close to the Mills’ transport department. Ikramuddin, son of Alauddin, an employee of Pakistan Steel Mills, had a police report registered about the theft on April 3, 2016, at Bin Qasim Police Station, “on the direction of his senior officers”. The length of the stolen wires was reported to be 2,370 metres for one type and 164 metres for the other.

A dispensary inside Karachi Steel Mill Township
A dispensary inside Karachi Steel Mill Township

Rehan Shah has invited all the serving and recently retired employees of Pakistan Steel Mills to attend a court hearing on September 2, 2016. He filed a petition at the Sindh High Court on March 18, 2015, for the payment of staff salaries. “It is mandatory for all employees to be present at the Sindh High Court at 8 am,” reads the text message that he has sent around.

Nobody shows up, except one former employee: Muhammad Akram.

Shah is agitated. With a file full of documents in one hand and his phone in the other, he is nervously walking in and out of the courtroom. The rest of the workers, Shah tells me, are getting on the buses and will soon be heading to the court. His hopes do not materialise.

Shah is known among the workers as Comrade Rehan. A soft-spoken, simple and unassuming man, he began to fight for the rights of labourers when he joined Pakistan Steel Mills in 1993 as a junior assistant. He initially worked in the accounts department, but once the management discovered his union activities, it transferred him to the coke oven plant. When you work there, he says, the black dust from the coal is so thick around you that it covers your entire body.

When the Mills had been operational, the coke plant could generate enough electricity to pay off the salaries of all the workers, he claims. And not just electricity, Shah says, but three different types of gases that then help run the thermal power plant. (That plant once generated 165 megawatts of electricity. After fulfilling the Mills’ needs, the management would sell the surplus for distribution in other localities.)

Shah’s transfer did not stop him from doing what he had been doing. New employees were hired at the time and Shah discovered that they were not receiving any hazard benefits. He helped all of them fill in a form to claim those benefits. That is how he came to be known as Comrade Rehan. From then on, Shah stepped in where and when workers’ rights were being compromised. He has received 20 show cause notices for his activism, he tells the Herald, laughing.

Inside the iron making department of Pakistan Steel Mills
Inside the iron making department of Pakistan Steel Mills

Since Rehan filed his petition, there have been about half a dozen hearings. There has been no substantial progress in the case though.

As the judges rise to leave for Friday prayers at 12:30 pm on September 2, Shah and his lawyer, Nadeem Shaikh, go to their desk and plead for a hearing. This is a matter of life and death for 13,000 employees of Pakistan Steel Mills who have not been receiving their salaries, Shaikh quickly tells the judges (who are scheduled to hear over 30 other cases that day).

The judges listen to him briefly and give him the date for the next hearing: September 21.

On that day, too, no more than two workers join Shah at the court. The judges hear the case for a few minutes and adjourn it to October 25. The only development that day: the court summons the Mills’ chief executive officer (CEO) to be present at the next hearing.

That will only start substantial proceedings — provided the CEO turns up. How many more hearings will the court take before it issues a verdict is anyone’s guess. And it is not certain if the verdict will be in the favour of the workers.

The vague promise of the petition’s outcome inspires no one back at the Mills. More importantly, the machines will not whir, the plants will not hum, the furnaces will not radiate — even if the judges decide the case tomorrow.


Shamshad Qureshi, Chairman of the Peoples Workers Union (CBA), Pakistan Steel Mills, responded to the story after it was published, in a letter to the Herald. Here is the edited version of his reponse:

This refers to the article “Burnt Out: The demise of Pakistan Steel Mills”, that appeared in the Herald’s October 2016 issue. The article stated that I was accused in the Pakistan Steel Mills canteen case, which is incorrect. The reporter never contacted me or took my point of view and made allegations against me that are totally baseless and untrue. As CBA chairman, I have no role to play in the award of a canteen tender. I was never implicated or nominated in the First Information Report (FIR) as mentioned in the article.

Peoples Workers Union won the 2008 referendum, held under the supervision of NIRC, with a substantial margin. The registration of all seven of its opposing unions was cancelled by the government.

To imply that PPP appointed Chairman and CBA is in any way responsible for decline in performance of the Mills is incorrect. It is the job of the federal government to appoint the management of steel mills and monitor their performance. The chairman was sacked on corruption charges by the then Prime Minister at the floor of National Assembly on 18-8-2009; the case was then directed to the Federal Investigation Agency (FIA) for further investigation.

Peoples Workers Union won the referendum for a third time in a row in November 2013 during the tenure of the present PML-N government. This proves the confidence of the workers in the union.


This article was originally published in the Herald's October 2016 issue. To read more subscribe to the Herald in print.


The writer is a staffer at the Herald.