The Senate Standing Committee on Industries and Production has recommended that the entire top management of the Pakistan Steel Mills (PSM) must immediately be replaced by experienced professionals or be privatised in a transparent manner.
In a report submitted to the House by its chairman Senator Ishaq Dar on Wednesday, the sub-committee headed by Senator Haroon Akhtar of the Senate Standing Committee on Industries and Production has recommended replacement of the entire top management of the PSM by skilled professionals to make the PSM a profitable unit.
It suggested that any further cash injection will be a waste as PSM is like a bottomless pit, whatever goes in will never come out. "If such changes are not possible, the sub-committee recommended that the PSM should be privatised in a transparent manner. The sub-committee had also informed the Standing committee during its meeting on January 29, 2010, that the name of ex-chairman PSM Moeen Aftab Sheikh was put on ECL as he was unable to convince the sub-committee about his innocence.
The committee was further informed that sale of billets to certain specific enterprises eg Al-Abbas Group had dramatically increased even when capacity utilisation of PSM was on decline in year 2008-09. The Minister concerned had told the committee that the government cannot afford to close the PSM that is why Rs 10 billion was provided as sovereign guarantee.
He also proposed that both short and long-term measures need to be taken to make this national asset a profitable unit. The committee was informed in its meeting on January 20, 2011 that Rs 3 billion out of the bail-out package of Rs 10.6 billion approved by the Prime Minister was received by the PSM in June 2010 and the remaining amount of Rs 7.6 billion was for rescheduling of bank loans by mid of January 2011.
The report further said that the committee had sought acceptable reasons for loss to the tune of Rs 22 billion in the PSM from the ministry. The sub-committee was informed about key financial indicators to give an idea of the financial debacle that took place in 2008-09 and that the PSM management had asked the government for a further debt of Rs 10 billion, which will further deteriorated the debt/equity ratio. It was found that stock levels of coal and iron ore were highest when imported coal prices were highest in July/August 2008.
In spite of a sharp decline in sales in August, September, October and November, 2008, huge quantities of astronomically high priced raw material was unnecessarily imported, the report said. The report further disclosed that it appears that in the first few months of 2008-09, the PSM had deliberately kept prices low to give its favourite dealers windfall profits.
The report further said that the committee reached the conclusion that ex-chairman Moeen Aftab together with some of his top managers especially, Director (Commercial) was involved in blatant financial bungling. They have rendered PSM, a crown jewel of the nation, bankrupt while MOI played the role of a silent spectator as no efforts were made by it to persuade PSM to seek substantial discounts from raw material suppliers and shipping companies.
The report further said that the sub-committee had strongly recommended the start of a criminal investigation against the top management, especially the ex-chairman and ex-director commercial including the agent mafia supplying key raw material to PSM and those representing shipping companies to find out bribes that probably were paid to top management of the PSM giving them the incentives not to seek substantial discounts.
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