The Board of Directors (BoD) of Pakistan Steel Mills (PSM) is meeting on February 20 to discuss the mills” privatisation, a move proposed by the Privatisation Commission (PC) to stop continuous bleeding of scarce financial resources under the guise of revitalisation, official sources told Business Recorder.
PC argues that despite administrative and financial efforts made under the CCoR, the revival of PSMC is still a pipedream as PSMC management is finding it hard to adhere to its proposed business plan(s) primarily because of insufficient and untimely release of the requisite funds.
Notwithstanding the bleak financial and administrative conditions, PSMC contains the potential to be revived subject to provision of sufficient funds, a competent professional management and independent and entrepreneurial decision-making.
However, PSM has given the mandate to the Ministry of Production to decide about its privatisation anew, but the Ministry has still not responded to the letter written by the PSM management.
Other agenda items will be as follows: (i) draft annual audit report 2011-12;(ii) update financial position including implications of a letter of Additional Secretary of December 21, 2012 and Chairman A.F committee letter of January 1, 2013 about outstanding against imports;(iii) update position of CBA agreement (2010-12) and CBA pamphlets against Board/ Board Committee and (iv) appointment/ removal of internal auditor & Chief Financial Officer (CFO).
The sources said, PSM incurred losses of Rs26.526 billion, Rs11.566 billion and Rs12.434 billion in 2008-09, 2009-10 and 2010-11 respectively. Losses for 2011-12 were Rs22.273 billion.
Analysts believe that losses in 2012-13 will be around Rs30 billion as official documents depicted Rs11.566 billion business losses in six months ended on December 31, 2012 and the pace of losses remains the same; these would escalate to historic level if Rs8 billion burden of Charter of Demand of CBA and Rs3 billion bills of SSGC is included.
Privatisation Commission maintains that besides bail outs/ financial assistance other initiatives and reform plans for the rehabilitation of PSMC undertaken by both Ministry of Production and Finance Division (Economic Reform Unit) under the guidance of CCoR were not implemented and included: indigenization of raw materials, appointment of new independent Board of Directors, separation of the offices of the Chairman and CEO, revaluation of fixed assets, initiating the revival of MoU with the Russian company including technical audit of the PSMC for capacity expansion up to 1.5 MT/annum, organisational restructuring including hiring of professionals etc. Hence PSMC could not achieve the desired reforms and revival of PSMC is far off The operational and financial conditions of PSMC continued to deteriorate and recently its production has dipped below 15 percent capacity, well below the break even of 75-80 percent of production capacity, thus causing an estimated financial hemorrhaging of Rs1.6 billion per month. Accumulated losses of the company have crossed the mark of Rs56 billion (31 Mar 2012), negative equity of Rs23 billion, outstanding liabilities increased to Rs67 billion (31 Mar 2012), deficit in gratuity funds assets of Rs6 billion and outstanding contribution of Rs3 billion to employees” provident fund trust and additional adverse impact of Rs1 billion per annum on account of regularisation of over 5,000 employees in FY2010.
Employees of PSM have not been paid their salary for the month of January 2013 because of the ongoing financial crunch, which implies that the entire bailout package has been spent, said an official on condition of anonymity.