PSM financial, operational matter: Prime Minister convenes meeting on March 6

Prime Minister, Syed Yousaf Raza Gilani has convened a meeting on March 6, 2012 (Tuesday) for deliberations on financial and operational matters of Pakistan Steel Mills (PSM), including Finance Ministry''s alleged reluctance to support GoP guarantees, well informed sources told Business Recorder.
Ministry of Production (MoP) gave a presentation to the Prime Minister on December 13, 2011 in which all financial problems of the mills and administrative issues came under discussion. After detailed discussion, the meeting took the following decisions: (i) appointment of CEO in PSM and filling up of vacant positions on the Board of Directors be finalised urgently; (ii) Business Plan of PSM was approved in principle with the direction that it be finalised with new CEO in place; (iii) Cabinet Committee on Restructuring (CCoR) was authorised to take appropriate steps for the revitalisation and re-structuring of PSM and bring its proposals/recommendations to that effect before the cabinet on December 14, 2011.
The sources said, MoI and Chairman PSM Board Fazal Ullah Qureshi sent a number of letters and summaries to the Finance Ministry and other concerned stakeholders but no progress has been witnessed so far.
Various correspondence were made in this regard with MoF which are as follows:
(i) Chairman BoD PSM sent a letter addressed to Secretary MoP on August 18, 2011, a copy of which was dispatched to Secretary Finance; (ii) Chairman BoD PSM sent a letter addressed to Finance Minister on January 25, 2012;(iii) MoP sent a letter addressed to Secretary (Finance Division) on January 27, 2011; and (iv) Secretary MoP sent a letter addressed to Secretary Ministry of Finance on January 31, 2012.
According to sources, due to non-release of finance facility of Rs 11 billion in time, production capacity remains below 20% with heavy losses of Rs 40 million per day ie Rs 1.2 billion per month. "Capacity can be improved only when availability of raw material is ensured, which totally depends upon immediate financial assistance by GoP in accordance with Business Plan," commented one of the Board members who is close the Chairman.
Finance Ministry has not paid any heed to the approvals and on some pretext or the other failed to 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.
The sources said PSM has suffered a loss of Rs 3 billion during the last two months due to delays attributed to MoF, and therefore the original finance facility of Rs 11 billion identified in the business plan would no longer be sufficient and Rs 14 billion is now required. Additional Rs 3 billion should be contributed by GoP as equity as PSM in not capable of paying back the loan and its mark up as per business plan.
PSM, sources said, has recommended following actions to save the mills from shut down: (i) finance facility of Rs 11 billion should be immediately released as per business plan, whereas additional Rs 3 billion loss should be covered through an injection of GoP equity; and (ii) a disbursement of Rs 5 billion that was linked to the appointment of CEO, should be delinked from the appointment of CEO. Business plan for rehabilitation of the mill was based on Rs 11.242 billion used for procurement of raw material that would enable the Mill to break even and reach 75% of capacity utilisation.