In a major move to resolve long-standing employee grievances, the federal government has approved a loan of Rs. 2.87 billion to Pakistan Steel Mills (PSM) for the settlement of retrenchment benefits owed to former employees.
The disbursement marks the final tranche of a Rs. 19.656 billion package initially sanctioned in 2020 to cover the full and final dues of approximately 5,870 employees affected by the closure and downsizing of the state-owned industrial giant.
The latest loan, approved under the 2025–26 Federal Budget, is structured to be recoverable over a 20-year period, with a five-year grace period for principal repayment. Interest will be charged at the prevailing market rate.
The National Bank of Pakistan (NBP) has been directed to release the funds upon receipt of the necessary documentation, including a payment schedule and authorizations from PSM.
The retrenchment process began after PSM halted operations in 2015 due to sustained losses and inefficiencies. By the end of 2021, over 4,500 employees had been retrenched or retired, with partial payments made in two earlier tranches—Rs. 11.013 billion in December 2020 and Rs. 5.771 billion in January 2022.
However, hundreds of former employees were still awaiting full settlement of their dues, including gratuity differentials and retirement benefits. The prolonged delay prompted legal action, culminating in a constitutional petition filed in the Sindh High Court.
Once a symbol of Pakistan’s industrial strength, Pakistan Steel Mills has remained dormant for over a decade. Established in 1973 with technical assistance from the former Soviet Union, the plant once had the capacity to produce more than 1.1 million tons of steel annually. Efforts to revive the ailing industrial complex gained momentum earlier this year, with Pakistan and Russia signing an agreement in July 2025 to rehabilitate and expand the Karachi-based facility.
The latest financial intervention aims not only to close a painful chapter for former PSM employees but also to clear a key hurdle in the path to the mill’s long-awaited revival.