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Pakistan Steel Mills at Risk of Closure After Government Stops Gas Supply

Pakistan Steel Mills

The Ministry of Industries and Production has instructed Pakistan Steel Mills to cease gas supply to the steel plant, dealing a blow to its revival efforts.

According to a notification from the ministry, issued on Sunday, the Chief Executive Officer of Pakistan Steel has been directed to stop gas supply to the plant.

This decision follows a directive from the Economic Coordination Committee’s meeting on May 23, shifting the responsibility for Pakistan Steel’s gas obligations away from the federal government after June 30.

The circular highlighted that gas supply to critical parts of Pakistan Steel, such as blast furnaces, had been severely restricted since June 2015.

Initially reduced in January 2015 when the plant was operating at 50% production capacity, the gas pressure was later increased to 65% in March that year.

Subsequently, further reductions were implemented in June 2015, resulting in significant financial losses for Pakistan Steel.

In response to reduced gas pressure, measures were taken to extend the lifespan of machinery and equipment, including the use of a venturi meter. Now, after nearly nine years, this restriction has been lifted.

As of June 30, 2023, Pakistan Steel reported losses amounting to Rs 22.4 billion, with gas obligations totaling Rs 33.5 billion against assets valued at Rs 83 billion. During the fiscal year 2023-24, the plant incurred losses amounting to Rs 6 million per hour.

Established on December 30, 1973, by former Prime Minister Zulfikar Ali Bhutto, Pakistan Steel Mills was designed with a production capacity of 2.2 million tons of steel. In 2009, its ownership structure included a 12% shareholding.

Employees of Pakistan Steel Mills expressed dissatisfaction, stating that the decision to close the plant and replace it with an export processing zone was made without their consultation or consent.

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