PSM on the verge of collapse

The country's largest steel producing plant is on the verge of collapse as its production has reduced to below 15 percent and per month loss has crossed one billion rupees mark due to slow down in sales and unavailability of basic raw material owing to financial crunch. Sources told Business Recorder on Monday that Pakistan Steel Mills (PSM) is facing severe financial crisis followed by mismanagement and drop in sales.
These things together have put the country's largest and state owned plant in severe financial troubles. Financial crunch has resulted in shortage of raw material resulted in massive decline in production, which now has reduced to below 15 percent. During the last month production has reduced to 14.6 percent, while at the end of last fiscal year it was 36 percent, they said.
During the three weeks of March production was below 10. However, in the last week extra heats were generated to improve the production. Presently, raw material including fine ore and coal has almost vanished. No more import order has so far placed by the management for the import of fine ore due to unavailability of funds.
However order of coal import has already placed, which is expecting to reach Karachi in third week of this month. Few months back, the federal government approved a Rs 6 billion bail out package for the mill, however, according to sources, that was adjusted by the banks on account of previous payments and only one or two consignments of raw material was imported with funds provided by the federal government. Currently, PSM is facing over one billion rupees per month loss due to decline in production as well as sales and accumulated losses during the first nine months of the current fiscal year have crossed Rs 10 billion, they added.
Cases against Steel dealers of steel mills by FIA to recover losses occurred to mill has also put negative impact on the mills' performance and PSM's sales have also witnessed a sharp decline during the current fiscal year. PSM's sales during March 2011 were only Rs 1.14 billion.
Sources said that financial condition of the Steel Mills is gradually deteriorating and employees are much worried about their future. Out of two blast furnaces each is being operating on alternate days to keep the burn plant and few tons of raw materials is being utilised to continue the production. While, production of furnished products has almost finished and only HR is being produced. Billet mill is already closed since a long time, while cold rolled mills have also shutdown since the cut off of electricity by the KESC on none payment of Rs 211 million bill.
Besides facing loss of billions of rupees, PSM has to pay off huge bank loans and government taxes, while the management of the Steel Mills has been also blamed for utilising billions of rupees of workers' gratuity and Provident Funds for the import of raw material.
Current crisis in the mill is attributed by low capacity utilisation, financial crisis, rise of the cost of coal in the world market and mismanagement; sources said and added this has put the mill on the verge of collapse. "The mills situation will be improved during next fifteen days as the process for the import of raw material has initiated", said a high official of PSM commenting on the current situation.
He said so far the government has provided Rs 6 billion in different instalment, which delayed the import of basic raw material. Although we demanded Rs 12 billion and a bail out package was also approved by the federal government, however it has not received on time resulted in shortage of raw material, he added. Talking about the new hiring in the financial stripped mill, he said that in the future it is expected that hundreds of skilled employees will be retired and to fill this gape, PSM has decided to appoint fresh engineers.
Shamshad Qureshi chairman CBA union said, "as a CBA union we are also supporting the management to end the current crisis". He said that salaries of PSM employees have not increased from last three years, therefore, CBA has requested for a special package for employees including officers.
Pakistan Steel Mills remained a profitable organisation from 2001 to 2008 and it was privatised in May 2006, to a consortium of Saudi Arabia-based Al Tawairqi Group of companies, Russia's Magnitogorsk Iron & Steel Works and local firm Arif Habib Securities paid against $362 million (Rs 21.6 billion). The consortium got majority shares in the mills to take control of Pakistan's largest steel plant. However, later a nine-member bench of the Supreme Court had annulled the sale of the country's largest industrial and had directed the government to refer the matter to the Council of Common Interests within six weeks.