Ministry of Industries and Production is to seek a bailout package of Rs 21 billion for a ”technically bankrupt” Pakistan Steel Mills (PSM), well-informed sources told Business Recorder. It has also been learnt that the Privatisation Commission is working on a plan to sell 26 percent shares of the mills. Former Chief Executive Officer Major-General Muhammad Javed (Retd) had sought Rs 11 billion whereas his predecessor Saadat Cheema raised it to Rs 17 billion.
“We need a bailout package of Rs 21 billion which includes Rs 3 billion for salaries, Rs 8-9 billion for raw material in addition to payment of gas and electricity bills and payment of interest to banks,” the sources added. Pak Steel argues that whenever the federal government extends a bailout package, banks deduct their interest in advance prior to disbursing the amount, which is not enough to meet the objective.
The sources said almost 1,000 employees are reaching the age of superannuation but the mills does not have adequate funds to pay them pension and gratuity. According to sources, PSM”s liabilities have soared to Rs 90 billion, which is more than the value of its assets.
Coke stocks have almost depleted and substandard coke is being used, which is causing harm to machinery in particular. COBP is being operated for 56 hours against the machine design of 16 hours and it will be a disaster if PSM does not initiate the process of planned shutdown of blast furnaces and COBP on heating. The Board of Directors (BoD) which was appointed by the previous government and is held responsible for all the financial losses to the national exchequer is still in office.
The sources said PSM”s financial woes will be discussed with Finance Minister, Senator Ishaq Dar prior to submission to the Economic Co-ordination Committee (ECC) of the Cabinet. Earlier, the caretaker Prime Minister had approved a bailout package of Rs 11 billion but later it backed out after banks refused to extend the amount on the directives of caretaker government. Finance Ministry had also set stringent conditions for the release of that amount. When contacted, PSM Board Chairman Fazal Ullah Qureshi said that the PSM will remain in financial loss until it achieves 80 percent Capacity Utilisation (CAPU) as 75 percent CAPU is a threshold for achieving break even or complete a piece of business, etc, without either losing money or making a profit.
In reply to a question, he said the government has to first approach the Supreme Court, then the Council of Common Interests (CCI) and federal cabinet before it decides to privatise PSM. Pakistan People”s Party (PPP), which is accused of induction thousands of party workers in PSM, is expected to oppose its privatisation at the CCI forum.