Three of Pakistan's public sector units have pulled down Pakistan economy very badly. These are Pakistan Steel Mill, Pakistan Railways and PIA. Combined losses exceed PKR 705 billion which constitute a significant % of its GDP. PSM is now closed for a very long time, a couple years may be. Bhutto, who had leftist leanings had maintained good relations with both soviets and Chinese wanted to emulate Nehru. On seeing, Bhilai Steel plant agreement inked in 1955 and the plant commissioning in 1959, Bhutto wanted a steel mill in Pakistan too. Consequently, he got in touch with Russian who set up a 1 MMTA steel plant based on imported ore and coal near port Qasim in Karachi in 1973. Steel is a basic product that plays a pivotal role in industrial development. It requires 4 basic ingredients viz high grade iron ore (65%+ Fe), metallurgical grade coke, lime stone and dolomite, the binder. Use of coke can be avoided by going through DRI (Direct Reduction Iron) and instead gas is used. PSM functioned well after commissioning but wasn't managed well subsequently either through expansion or innovative modifications. Mostly, it was run by retired generals or bureaucrats, who lacked technical or commercial vision. Today PSM. Has accumulated PKR 170 billion as losses which contributes as a significant percentage of country's GDP. There are several reasons for losses. Some of them are high cost of raw materials in the last decade due to demand in China. The prices have now softened yet are much higher than in 1970s. Pakistan imports iron ore from China and South Korea @ $ 115 per tonne and metallurgical coal from Australia @ $ 138 per tonne. It has sufficient limestone mined within the country. Besides, the manufacturing processes remain outdated in terms of modern times. Thus cost of production remains high with high labour content. PSM imports the following raw materials annually to produce 1.1 MMTPA : Coking coal 1050,000 MT Iron ore 1910,000 MT Manganese ore 28,000 MT Ferro manganese 6,000 MT Ferro silicon 3,000 MT Aluminium 2,000 MT Fluorite 5,000 MT Zinc 3,000 MT There is no mention in CPEC about developing iron ore mines in Chiniyot so that local iron ore could have been utilised. Iron ore in Chiniyot was also discovered by the Chinese. Surprisingly, govt remained silent on this mine and instead is spending money on Thar lignite. Today, PSM has accumulated losses of over $ 1.7 billion and the plant remains shut thus accumulating further losses by fixed costs. Govt has decided to privatise it but finds no buyers. The situation has become very grim as Tuwairki steel mill has wound up because of higher price of gas, which is supplied from Sui. Major causes of loss are: # High cost of raw materials. Kalabagh ore and ore from Chiniot can lower that cost. # a huge labour force of 23,000 as against required labour force of 12,000 is another factor that sucks sap from the plant. # Skewed pattern of investment. Debt to equity ratio is very high thus constant drain on interest. Debt corresponds to PKR 8 billion. It is basically flawed govt policies, lack of vision, improper management and no modifications with passage of time.