Finance Minister, Senator Ishaq Dar has approved payment of two months’ salaries (August- September 2015) to the employees of Pakistan Steel Mills (PSM). According to official documents, Privatisation Commission (PSM) has sent a summary to the Finance Minister for release of two months’ salary.
The document available with Business Recorder reveal that the ECC on April 24, 2014 considered a summary submitted by the Privatisation Commission on “restructuring options of the PSM” and approved the grant of Rs 18.5 billion bailout package to the PSM, with a view that at the time of privatisation PSM will be in a running condition and that it will achieve 77% capacity utilization by January 2015. The restructuring plan was based on achieving tangible milestones of progressively increasing capacity utilization with a resultant impact on sales and profit/loss.
However, due to several reasons, PSM could not achieve the agreed capacity utilization since the ECC meeting of April, 2014. Thereafter, the ECC considered, on June 17, 2015, the summary submitted by the Privatization Commission on “restructuring options of PSM”, which included a revised operational plan, duly approved by PSM’s Board on April 30, 2015. The summary also contained a proposal for additional funds amounting to Rs 6.4 billion, to meet the targets of the proposed operational plan. However, after detailed deliberations, the ECC of the Cabinet accorded approval to only release salaries for two months ie for March and April 2015.
Since then the liquidity position of PSM has further deteriorated, as PSM has struggled with the disposal of its finished goods inventory. Furthermore, the reduction of natural gas pressure by SSGC has also impacted the slab inventory, worth more than Rs 4 billion, as the capacity utilization has dropped to zero since 10th June, 2015.
Since June 17, 2015, only one ECC has been held on PSM, on September 17, 2015 wherein the ECC accorded post facto approval of the release of salary for the month of May, 2015, which was released for Eid-ul-Fitr, and 2 more salaries ie for the months of June and July 2015. Furthermore, the ECC also directed the PSM management to liquidate accumulated inventory amounting to approximately Rs 9 billion to the ECC for further release of salaries.
Pakistan Steel Mills since June 2015 has managed to dispose of its finished goods inventory amounting to Rs 1.5 billion after reducing its products’ prices up to approximately 20%, in order to compete with the imported HR material from China, which the PSM claims has been dumped in the Pakistani markets and as a result of the reduction in prices of the HR products, in the international market.
At present, the PSM has a salable inventory worth approximately Rs 600 million only, while inventory worth approximately Rs 5.2 billion is of unfinished material, which can only be sold once gas supply has been restored and the unfinished material is converted into finished/salable products.
PC maintains that PSM employees have not been paid salaries for the past 3 months and the current salable inventory is not sufficient to meet the day to day expenses including salaries, and requested that the ECC may consider the payment of two months salaries for the month of August and September 2015.
National Assembly Standing Committee on Industries and Production has also recommended that salaries to employees of Pakistan Steel Mills should be paid immediately. Asad Umar said that government has opted for the worst option namely to shut down PSM. He said that Russian and Chinese consultants had noted that steel mill was still viable and it could be run.
In reply to a question, Secretary Industries and Production, Arif Azim informed the committee that PSM achieved maxim CAPU of 62 per cent briefly. Ms Sajida Begum, MNA, clarified that it was perhaps for a couple of days only. Later, talking to Business Recorder, Minister for Industries and Production Ghulam Murtaza Jatoi said that CEO PSM claimed before the ECC that he would achieve 77 per cent capacity utilization after spending a bailout package of Rs 18.5 billion. However, Finance Minister, Ishaq Dar and Chairman Privatisation Commission, Muhammad Zubair were of the view that achieving 50 per cent CAPU by spending Rs 18.5 billion will be sufficient. Answering another question regarding reports with regard to removal of incumbent CEO PSM, the Minister stated that he is not aware of this, adding that he neither brought him in nor can he remove him.