Losses amounting to Rs245.9 billion have been incurred by the Pakistan Steel Mills Corporation Limited over a period of well over a decade due to continued financial distress, according to a recent report of the Auditor General of Pakistan. Inadequate governance and poor financial management along with complete non-functionality of operations for several years have led to this collapse.
The loss for Pakistan Steel Mills Company rose by more than 1,355%, increasing from Rs16.9 billion for the fiscal years 2008-09 to Rs245.9 billion in fiscal year 2023-24. Moreover, it has not been able to compile its financial results for 2023-24 and 2024-25, which raises great concerns regarding financial integrity and corporate accountability in one of the biggest public sector corporations in Pakistan.
Governance Issues Revealed through Audit
Some of the governance and management issues pointed out by the Auditor General include inappropriate accounting for equity valued at Rs 11 billion, out-of-date information on ownership covering 1,675 acres of land, and the appointment of an executive against the State Owned Enterprises Act.
The audit further revealed that there is unfinished steel inventory valued at Rs17.6 billion that has been lying unsold since the shutdown of operations in 2015 – inventory which has been sitting for close to a decade and depreciating in quality and value all along.
Cash Flow Dilemma Worsens Despite Outstanding Theft
The company is experiencing serious cash flow issues due to outstanding theft, poor management of assets, and the unauthorized use of 1,929 residential units which could be used for rental income and operational needs. Annual losses in just the area of water cost differences amount to Rs1.1 billion or more.
Yearly Averages Amount to Rs25.5 Billion
In the period between fiscal years 2008-09 and 2023-24, yearly losses of Pakistan Steel Mills have been recorded at Rs25.5 billion on average. This loss has been the case with all years except for fiscal year 2021-22, but even the profits made in that fiscal year were not due to the actual operations of the company rather, an asset valuation led to the profits.
Loans by Government Amount to Rs106.2 Billion from 2013
For the purpose of saving the company, the government offered loans worth Rs106.2 billion starting from 2013 until 2025. The auditor found that the cost of financing grew significantly, rising from Rs464 million for the year ending 2008-09 to Rs20 billion for 2023-24, even though administrative expenses grew three times despite the fact that the plant was not functioning after 2015.
The entire revenue dried up after the closure because any revenue earned by the corporation after that time has been through selling the leftover inventory and not from any economic activity.
Total Liabilities Increase to Rs358 Billion
Through the audit, it was discovered that total liabilities were increasing up to Rs358 billion by the fiscal year 2023-24. It should be noted that the increase in equity of the company in this particular time was due mainly to the reappraisal of land instead of an increase in profitability. There had been a sharp increase in trade debts as well.
According to the Auditor General, immediate restructuring of Pakistan Steel Mills, permanent appointment of CEO, and the formulation of a full-fledged revival plan through public private partnerships or leasing is imperative. This would ensure that no more losses occur and that the company remains financially sustainable in the long run.
The Pakistan Steel Mills, now with accumulated losses of almost a quarter trillion rupees and which has not been operational since 2015, serves as one of the most visible examples of the mismanagement of the state-owned enterprises in Pakistani history, where past administrations have financed the enterprise by lending to it rather than fixing its structures.
Nayab Fatima is a media professional specializing in fact-based journalism, research, and analytical reporting on technology, telecom, aviation, and automobiles.
