Pakistan Steel Mills has served notices on over 550 dealers for payment of millions of rupees as compensation against the financial losses caused through manipulation in the purchase of steel products.
Sources told Business Recorder on Monday that Pakistan Steel through its legal advisor M G Dastgir & Company has asked the dealers for the payment of premium earned on the sale of different products including billets, Cold Rolled Coils (CRC), Hot Rolled Coils (HRC) and galvanised products.
Pakistan Steel estimates that the dealers earned some Rs 160 million premium during June 2008 to August 2009 on billets procured from the state-run steel producer. In the first phase, PSM has served notices on 176 billet dealers giving them two weeks ultimatum for payment. These notices were served on February 18, 2011, however a few dealers could make payments against these notices.
Sources said PSM has also estimated Rs 103.22 million losses in terms of sale of CRC, Rs 61 million on HRC and some Rs 40 million on GP product. Notice for the recovery of these amounts have been sent to the dealers. Cumulatively, Pakistan Steel has served notices for recovery of about Rs 364 million. During last week, some 552 notices were sent to the dealers for recovery of compensation against the losses caused through manipulation in the purchase of CRC, 465 notices in HRC and 532 notices in galvanised products.
Sources said that to pursue the implementation of the Supreme Court directions regarding the alleged corruption cases, a high-level meeting of the ministry of industries and production was held in first week of February. The meeting was attended by the ministry, FIA and PSM officials.
During the meeting, FIA was said to have agreed that price differential calculated by PSM on the basis of prevailing premium in the market be recovered and not on Commonwealth Independent Status (CIS) basis as calculated by commercial audit.
During the meeting it was also agreed that a similar exercise would be carried out for other products such as billet, HRC, CRC, GP and pig iron, working out the recoverable amount against each dealer, in order to recover the losses. According to M G Dastgir & Co these notices have been issued on the instructions of its client (Pakistan Steel).
"It has been observed, after due process of investigation, that you (dealer) collusively manipulated the deals for purchase of billet through Marketing Department of Pakistan Steel during the period from June 2008 to August 2009 in collusion and conspiracy with the concerned officials of Pakistan Steel Mills with mala fide intention," a notices sent to a dealers said.
It is clearly manifested by the evidence collected that you (dealer) in collaboration and conspiracy with the concerned official of Pakistan Steel Mills, dishonestly and fraudulently secured along with other wrongful gains, it added. "Therefore, you are hereby asked to please refund the amount within two weeks after receipt hereof failing which Pakistan Steel will be constrained to proceed for recovery, entirely at your risk along with costs and consequences," the notices said.
Sources said with the issuance of these notices, the PSM management has assured the dealers that after payment against these notices, mills will not proceed any further in the court and all cases will be withdrawn against them. Although the notice for recovery of compensation were issued during last week, however so far steel dealers have not made 100 percent payment against these notices, they said.
Interestingly, these notices have also been served on those dealers, which have received account clearance certificate from Pakistan Steel. Pakistan Steel Mills had issued account clearance certificates to the dealers in November 2010, to build their confidence, sources said.
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