The Cabinet Committee on Restructuring (CCoR) would regularly monitor the performance of Pakistan Steel Mills (PSM) prior to the release of the approved bailout package, an official told Business Recorder on Thursday. The official said that the government would not provide the entire amount of Rs 14.6 billion to the PSM in a single instalment, adding that the money would be released in four instalments on a quarterly basis after monitoring PSM”s performance.
This was why the government was not ready to give sovereign guarantee to the PSM before the appointment of a new Chief Executive Officer (CEO) who, in turn, would give a firm commitment to improvement the Mills performance, he said. The CCOR, he added wanted the CEO to come up with a workable plan for capacity utilisation, turn PSM”s financial fortunes around and effectively deal with all other issues affecting the entity”s performance.
The CEO, the official claimed, had assured the CCoR that PSM capacity utilisation would be enhanced to 55 percent by December this year from existing 15 percent. The capacity, he said, would be increased to 80 percent by 2013. He said that the funding for PSM had been cleared by the CCoR on this assurance and subsequently approved by the Economic Co-ordination Committee (ECC) of the Cabinet. Of the total package, the government would release Rs 4.1 billion to the PSM in July this year while the next instalment of Rs 5.35 billion would be released in October 2012 (subject to satisfactory performance). Sources said that third instalment of Rs 3 billion would be due in January next year subject to achievement 55 per cent capacity utilisation. The final instalment of Rs 2.156 billion would be due in April 2013. An official of Finance Ministry said that the government could not afford to arrange money for a loss-making organisation without a firm assurance of better performance. The official added that the Russian government had expressed interest in investing in PSM, but it “is premature to say anything”.
Another official said that the government-to-government deal took relatively longer to conclude because it involved the signing of a Memorandum of Understanding (MoU) and various other formalities. The present annual capacity of 1.1 million tons was “sub-economic and the plant is in need of extensive capital repair/revamping. Therefore, an aggressive repair / revamping programme of all main production units and capacity expansion and investment would be required to achieve an output level of three million tons per year. Sources said that the business plan submitted by PSM”s management also envisaged capacity expansion to 1.5 million tons a year to improve economic level with a capital expenditure of Rs 32.5 billion.
Copyright Business Recorder, 2012
