The country's largest steel producer, the Pakistan Steel, will earn over Rs 3 billion net profit by the end of June this year. However, the production level is feared to decline to 80 percent due to increasing cost. While further rise in prices of steel products is also expected in line with the world markets.
In an exclusive interview with Business Recorder, Pakistan Steel (PS) Chairman Maj-General Muhammad Javed (retd) said that in the face of skyrocketing prices of steel products in world markets, prices of PS products are still lower than those of India and other regional countries.
During the last fiscal year, the Pakistan Steel earned a net profit of Rs 3.1 billion and paid some Rs 1 billion as dividend, which came about for the first time in the history of Pakistan, he pointed out.
He said the Pakistan Steel earned some Rs 4.8 billion pre-tax profits and paid Rs 1.6 billion taxes to the government and Rs 1 billion dividend in last fiscal year.
Despite the robust growth in steel product sales during the current fiscal year, he PS profit will not go higher than the last fiscal year, while level of steel production will also come down to 85 to 89 percent, he added.
He said that raise in prices of steel products by PS is not affecting masses, as two PS products, including galvanised steel and pig iron are still being sold under cost with a view to benefiting the common man.
"The main reason behind this price-hike was to curb the black marketing by steel dealers and traders and reduce the cost of production, besides rationalising steel prices in line with the international market", said Muhammad Javed.
He pointed out that PS is selling pig iron under cost by Rs 1,200 per tonne while profit margin on galvanised steel is Rs 500 per tonne. He said the PS would further raise steel prices whenever required and will not allow dealers and traders to manipulate local markets.
Javed said the Pakistan Steel is rather a fully commercial institution and not a service-provider. There is an opportunity available to PS to export steel products to earn heavily but it refrains from such exercise due to increasing local demand.
"The Pakistan Steel is using coke instead of coal for technical reasons, therefore, it is paying some Rs 3-4 billion additional for purchase of coke pushing steel prices up," said Javed.
The PS chief said that coke prices has shot up by some 200-300 percent and at present, it is spending over Rs 10 billion annually for the purchase of coke as compared to Rs 6 billion during the last fiscal year.
The iron ore price has also been increased by three times from $ 60-65 per tonne to $ 160-170 dollar per tonne, he added. Following the rise in the coke and iron ore prices the overall cost of production has gone up, which scaled down PS margin on steel product sales and compelled the country's largest steel producer to increase their product prices, he said. He claimed that surge in steel prices is not hurting common man. He termed it as propaganda from market manipulators who want to get more margin on PS products.
"In the past, the Pakistan Steel has exported steel products on higher rates and earned million of dollars. However at present, export has been stopped only to facilitate the local engineering industry," the PS chief maintained. "The Pakistan Steel has retired over Rs 15 billion loan, which stood at Rs 19 billion during 2000 and the remaining Rs 4 billion is expected to be cleared during next four years," Javed hoped.
Despite billions of rupee losses, he said the PS has not taken a single rupee from the government as subsidy. It runs its affairs at its own resources unlike other state-run institutions.
"It is our national responsibility to explore our local resources, the PS has raised its dependence on local resources and at present, it is acquiring iron ore and coal from Balochistan," he apprised.
About he PS power plant, he said that at the time he assumed the charge as chairman of PS, the power generation of the plant stood at 60-70 MW. But with the renovation, it is producing some 85-90 MW, of which some 10-20 MW surplus power is being supplied to Karachi Electric Supply Corporation (KESC), as a social responsibility.
The steel plant, he said, has almost completed some 25 years and at present, is being run with modifications. "The repairing work of coke-oven batteries is already under way. The Ukrainian engineers are carrying out the revamping job as 80 percent repair work of the first battery has almost been completed. It is expected that repair work will be completed within next three to four months", said the PS chief.
Javed said that the repair work of the second battery will be undertaken during this year to complete it by the end of June 2009. "We have paid four bonuses to workers, which have played a vital role in the restructuring and revival of PS and every bonus was worth Rs 720 million", he said.
He said in the current fiscal year the overall sales of PS with 30 percent growth will be Rs 39 billion as compared to Rs 30 billion in the last fiscal year.
When asked about sales in terms of volume, the PS chief said that he did have the estimate of sales in terms of volume and accepted that major reason behind the surge in sales is the steel products price-hike.
Though the PS has surplus manpower, there is no such plan to resort to downsizing. He said that at present, workers strength is 16,800, including 12,800 regular, 2,000 contract, and 3,500 on daily wages. While he claimed that there is no employ on deputation at the Pakistan Steel.
The Pakistan Steel Fabricated Company Limited (PSFCL), the parent company of Pakistan Steel Mill, has also been running into loss of Rs 550 million annually for the last many years. But it earned a net profit of Rs 50 million in 2007 under the incumbent administration, he maintained.
Briefing about his policy's key five-points, Javed said that he considered the PS should regularly pay a handsome amount to government as dividend. It should also pay all its pending loans and become able to pay the expenditures of ongoing major repair work those needs around 2.5 billion per year.
The PS should also save around Rs 6-8 billion to run the plant smoothly, besides paying bonuses and other incentives to mill workers, he added.
The PS chief said the Pakistan Steel is heading for self-reliance and is now increasing dependency on its local resources. "Balochistan is rich of excellent quality of iron ore in the areas of Chaghi and Bela and coal at Loralai. To purchase these products the PS is also contributing to its provincial economy," he said.
The PS recently has also signed an agreement with Sandak to procure 60,000 tonnes of iron ore and in the next few months, it is likely to sign more accords with local companies working in Balochistan, he pointed out.
"On conditions of no-compromising on quality and logistic sustainability we are investing billions of rupees in the backward areas of Balochistan," he asserted.
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