Economic Co-ordination Committee (ECC) of the Cabinet has allowed Pakistan Steel Mills (PSM) to mobilize loans without GoP guarantee to continue operations to the extent possible. Official documents available with Business Recorder reveal that on a summary on provision of financial assistance to PSM amounting to Rs 28.49 billion, the ECC advised Ministry of Industries and Production “to rework out the requirement in consultation with all stakeholders taking a holistic view and to bring a workable plan before ECC”.
However, on September 7, 2013, ECC approved a package amounting to Rs 2.9 billion for payment of salaries to employees, interim clearance of critical liabilities and workingcapital. It was stated that with a meager working capital of Rs 740 million out of Rs 2.9 billion, PSM has generated a sum of Rs 2.85 billion used for payment of utilities and local raw material supplies.
On January 16, 2014, ECC was informed that Board of Directors (BoD) of PSM carried out extensive consultations with steel market experts to suggest policy choices to the Government for resolving the problems faced by the PSM. The major administrative, technical/ economic and financial issues identified were explained to the ECC in five options.
While recommending option-five the meeting was informed that depending on the management”s capability and a qualified and capable workforce PSM”s revival could be possible. GoP would then have a choice to either privatise PSM or retain it as a state-owned enterprise. It was also stated that option-5 would address the issues that have continually plagued PSM for the past several years and caused irreparable hemorrhaging to the exchequer. The meeting was also told that besides mitigating GoP”s high-risk exposure, privatisation should also bring in dividends in the form of economic efficiencies, better supply to the local industry and privatization proceeds for GoP.
The meeting observed that bad governance, overstaffing and financial and technical mismanagement have brought the PSM to its present condition. Its accumulated liabilities are too huge to be met through the sale of its current assets and any financial commitment for its revival at this stage carries a high degree of risk. A view was expressed that the technical audit of the machinery and plants was not carried out which could verify the claims that with the proposed support the PSM could work at 80% of its capacity. Therefore, the said audit would not only determine the status of the machinery but would also suggest if aged plants would be attractive enough for any potential investors.
It was further observed that all proposals regarding revival and restructuring of the PSM should be duly considered by the PSM Board of Governors who should share their plan with the Privatization Commission and Ministry of Industries and Production. However, since PSM is included in the list of Public Sector Enterprises approved for privatization by the Cabinet Committee on Privatization (CCOP), Ministry of Industries & Production and Privatization Commission should work together to prepare a proposal on this score without compromising the right of its employees. Meanwhile, the PSM should be allowed to mobilize loans without GoP guarantee to continue its operations to the extent possible. The meeting, however, expressed its concern over non-payment of monthly salaries to the employees of PSM since October 15, 2013.
After a detailed discussion, the ECC decided that the employees of the PSM should be paid 45 day”s salary with effect from 15th October, 2013.
The sources said PSM management has sent a letter to the Ministry of Industries and Production for the provision of Rs 1.5 billion for this purpose immediately.
The ECC also decided that pending privatization of the PSM its restructuring exercise should continue in the transition period for which the PSM should prepare a plan and share the same with the Privatization Commission and Ministry of Industries & Production.