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MoF agrees to extend Rs 11 billion under Rescue Plan




  • Minister for Industries and Production, Shehzada Ahsan Ashraf Sheikh said on Tuesday that the Finance Ministry has agreed in principle to extend a one time Rescue Plan of Rs 11 billion to the bleeding Pakistan Steel Mills (PSM) to be formally approved on Thursday. 

    Caretaker Prime Minister Mir Hazar Khan Khoso, who presided over an informal meeting on Tuesday, urged the Finance Ministry to extend funds for the ailing PSM fearing that by the time the elected government came into power, PSM might be forced to declare bankruptcy. Taking caretaker set-up as a blessing in disguise, PSM has sought Rs 20 billion bailout package immediately in one go in addition to write off of interest on loans taken from NBP etc. 

    However, insiders who witnessed the meeting”s proceedings claim that PSM management demands were unlikely to be met due to financial constraints. Former Minister Secretary Finance Nasir Khosa had reportedly refused to give bailout package of Rs 20 billion to PSM on the instructions of caretaker government. 

    In an exclusive interview with Business Recorder, the Minister said that he wanted the Mill”s accounts to be cleared of all debts and the national asset should slowly increase its operational capacity. “We want the amount should be released in one go so that the mills can be run on 35-40 Capacity Utilisation (CAPU) in May and then increase it by 15 percent each month up to 70 percent in August,” he added. 

    He maintained that the remaining amount Rs 9 billion requested by PSM would be allocated in the federal budget as immediate release of the amount to PSM would widen the fiscal deficit. Replying to a question, he said that incumbent PSM Board was being reconstituted and new Board would be headed by the Minister for Production whereas Finance Secretary would also be a board member and had oversight on performance of the Mills. 

    Chief Executive Officer, PSM, Major General Muhammad Javed (retired) was seen in the corridors of Finance Ministry. The gurus in the Finance Ministry are deeply concerned about the source of funds to be extended to PSM and question whether it is advisable to give money to a loss making unit which, if past precedence is anything to go by, is tantamount to pouring good money after bad on the instructions of caretaker PM. Caretaker Minister for Industries and Production also met with the Minister for Petroleum and Natural Resources Sohail Wajahat Siddiqui and requested him to allow PSM to clear its gas bill of Rs 14 billion in instalments. 

    In reply to a question, the Minister said he had received a number of complaints against the CEO including a letter written by the “Voice”, an Association of Officers of PSM, and he was examining the accusations. When contacted, Secretary Production Shahid Ullah Baig also confirmed that he had received a six page letter from Voice. “I am just going through the six page letter. We will seek an explanation from PSM on these serious allegations against the CEO,” he said when this correspondent telephoned him to know his viewpoint a couple of days ago. 

    According to a press release, the Minister presented him a comprehensive and elaborate “one-go Rescue Plan” for the revitalisation of PSM and setting it up as a profitable organisation. The Federal Minister proposed a subsidy of Rs 11 billion to upgrade the technology, make the sick units operational and to enhance the production capacity of the Steel Mills. He also proposed that in order to make PSM financially stable, Rs 5 billion interest on loans payable to the National Bank of Pakistan be waived off. Finance Ministry will present its recommendations on the proposal on Thursday. Talking to the media after the meeting, Federal Minister said the organisations going into loss needed bold and courageous decisions and the ”one-go Rescue Plan” presented to the Prime Minister would prove to be a panacea for all the ills of PSM. 

    PSM maintains that it should be provided Rs 20 billion as equity as an immediate cash requirement to meet its working capital requirement and payment of immediate liabilities. PSM has requested that the payment should be made in the following sequence to save it from financial collapse: (i) Rs 11 billion should be released within seven days; (ii) Rs 9 billion should be released with 15 days; and (iii) the existing L/C facility of Rs 3 billion enhanced by the Ministry of Finance to Rs 6 billion may be further enhanced by directing NBP to open the additional financial facility of Rs 3 billion to allow smooth and increase flow of raw material immediately. The proposed utilisation is as follows: (i) procurement of raw materials Rs 11 billion; (ii) SSGC old liability Rs 3 billion; (iii) gratuity of ex-employees Rs 1 billion; (iv) provident fund liability Rs 2 billion; (v) capital repair Rs 1 billion; (vi) interest of remaining amount payable to NBP; and (vii) full payments of utilities for two months Rs 1.5 billion. 

    Copyright Business Recorder, 2013

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