Pakistan Steel Mills (PSM) is said to be on the verge of shut down as the Finance Ministry has refused to release the required funds in accordance with the Business Plan approved by the Prime Minister and Federal Cabinet, sources close to Minister for Production told Business Recorder.
PSM has recently reported to the Ministry of Production that it is left with only 12,242 tons of iron ore which is sufficient for 9-10 days consumption at 25 percent plant capacity utilisation. PSM has been working at 13 percent of the plant capacity utilisation sustaining a loss of Rs60 million daily at this capacity utilisation. On an average during last two months PSM has suffered a loss of over Rs 50 million per day, the sources added.
The sources said PSM''s efforts to find venues of spot purchases on emergent basis bypassing the PPRA are blocked by the non prevailing credibility of the company which not only is under pressure from banks and suppliers but has also lost a lot of money on account of various mismanaged decisions, one of which is loss of Rs one billion recently due to lost case in Canada with regard to arbitration with Indian company M/s Sociedade-de-Fomento Industrial Private Limited.
In addition PSM has also submitted forensic crime reports to prosecution agencies and Supreme Court, wherein the Mill is alleged to have suffered a loss of over Rs 10 billion on account of decisions taken by a management that was accountable to no one.
The sources said the last resort for revival or survival of the Mills was attempted by PSM Board through an exercise of proposing position paper on financial restructuring/5 years business plan to Government of Pakistan. The presentation contained a business plan for Rs20 billion including Rs11 billion fresh financing approved by CCOR/ECC for revival of the PSM.
"The business plan approved at all government fora up to the level of cabinet and the Prime Minister couldn''t be implemented because of the Ministry of Finance," the sources added.
Finance Ministry didn''t pay any heed to the approvals and on some pretext didn''t complete the approval process by sending term sheets to the National Bank of Pakistan(NBP) for releasing fresh injections, said an official of PSM on condition of anonymity.
Business plan for rehabilitation of the Mills was based on Rs11.242 billion for procuring raw materials for bringing back the Mill to break even by reaching 75percent of capacity utilisation whereby it comes out of the cloud of losses.
The sources further stated that the bail out package and its non-implementation has added further losses of about Rs5 billion up till now since its approval in December 2011. "Business Plan approved in December 2011 for revival of the Mills has become non feasible and outdated as size of required funds is much more than presented before the government at that time. If the losses of December and January are added, the plan has to be re-prepared to adjust loss of Rs5 billion," the sources maintained.
The Cabinet Committee on Restructuring (CCoR) headed by the Prime Minister''s Advisor on Finance, Dr Abdul Hafeez Shaikh, has not appointed full time Chief Executive Officer of PSM and matters are being run on ad-hoc basis.
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