Govt sanctions PKR 2.87B loan for Pakistan Steel Mills to settle retrenchment dues
This latest release disburses the final tranche, aiming to resolve a long-standing financial and legal issue that has burdened many former employees
Haris Zamir
Business Editor
Experience of almost 33 years where started the journey of financial journalism from Business Recorder in 1992. From 2006 onwards attached with Television Media worked at Sun Tv, Dawn Tv, Geo Tv and Dunya Tv. During the period also worked as a stringer for Bloomberg for seven years and Dow Jones for five years. Also wrote articles for several highly acclaimed periodicals like the Newsline, Pakistan Gulf Economist and Money Matters (The News publications)
In a significant step toward resolving long-standing employee dues, the government has sanctioned a loan of PKR 2.87 billion to Pakistan Steel Mills (PSM) for the settlement of retrenchment benefits to its former employees.
The sanctioned amount is part of the total PKR 19.656 billion package approved by the government in 2020 for the full and final settlement of retrenchment dues for approximately 5,870 employees of the state-owned enterprise.
With this latest release, the final tranche of the package is being disbursed, aiming to bring closure to a protracted financial and legal issue that has caused hardship to many former employees.
According to official communication, the PKR 2.871 billion loan will be recoverable over 20 years, with a five-year grace period for repayment of the principal. The loan will carry interest at the prevailing rate of the respective year, as per standard financial terms.
The National Bank of Pakistan (NBP) has been instructed to disburse the funds upon receipt of the required payment schedule and supporting documents, duly signed by PSM’s authorized signatories. The Ministry of Finance has earmarked the amount under the 2025–26 Federal Budget, specifically under Demand No. 91 – Federal Miscellaneous Investments and Other Loans and Advances.
The issue of pending dues has been contentious for years. After PSM ceased operations in 2015 due to continued losses and operational inefficiencies, a major retrenchment drive was initiated. By the end of 2021, 4,544 employees had been retrenched or retired, with partial payments made in two tranches—PKR 11.013 billion in December 2020 and PKR 5.771 billion in January 2022.
However, the remaining employees continued to await full payment of their dues, including gratuity differentials and retirement benefits. The delay led to legal proceedings, including the filing of a Constitution Petition (CP No. D-2102/2024) in the Sindh High Court by affected employees.
Once considered the backbone of Pakistan’s industrial base, Pakistan Steel Mills has remained largely non-functional for over a decade. Established in 1973 with assistance from the Soviet Union, the plant was capable of producing over 1.1 million tons of steel annually at its peak.
Pakistan and Russia also signed an agreement in July 2025 to revive and expand the Pakistan Steel Mills project in Karachi.
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