Rs 14.6 billion financing facility: PSM to submit quarterly performance report

Pakistan Steel Mills (PSM) will reportedly submit its report on quarterly performance indicators to the Economic Co-ordination Committee (ECC) of the Cabinet against financing facility of Rs 14.6 billion, official sources told Business Recorder.
Official documents showed that the ECC of the Cabinet was informed that Pakistan Steel Mills (PSM) earned profit between 2000 and 2008. During these years, the average capacity utilisation was 88 percent. However, it suffered losses amounting to Rs 26.5 billion during 2008-09 because of adverse international market conditions followed by a loss of Rs 11.5 billion in 2009-10 and Rs 12.4 billion in 2010-11. Its capacity utilisation during that period fluctuated between 40 and 36 percent.
The Business Plan for revival of the PSM, approved by ECC on December 1, 2011, showed Rs 10 billion projected loss for 2011-12 on the assumption that the funds of Rs 11 billion would be disbursed in one go. However, only Rs 6 billion was disbursed in four months, due to which PSM suffered loss of Rs 21.399 billion for the said year. During the current year, due to financial crisis, PSM continued to suffer losses because of non-availability of required funds for purchase of raw materials and its capacity utilisation was as low as 15% during the months of May and June 2012.
The ECC of the Cabinet was further informed that the Cabinet in its meeting on April 25 this year, while approving in principle the proposal relating to financial restructuring of PSM submitted by the Ministry of Production, directed that the Minister for Finance and the Minister for Production sit together, alongwith the newly appointed CEO of Pakistan Steel Mills and chalk out modalities for implementation of these proposals. Subsequently, the Cabinet Committee on Restructuring (CCoR), in its meeting held on June 28 this year, agreed on achieving average capacity utilisation of PSM of 50-55 percent for the year 2012-13. During the meeting, funding requirements of PSM amounting to Rs 14,600 million to achieve an average capacity utilisation of 50 percent during 2012-13 were discussed in detail.
The CCoR also agreed to provide Rs 1 billion to PSM as interest free loan by GoP as a special case to clear SSGC previous liabilities and directed the Ministry of Production to seek the approval of ECC for commercial funding of Rs 8.6 billion including mark up for FY 2012. Besides, the CCoR approved the funding requirement of PSM amounting to Rs 14,600 million to be made available on quarterly basis as follows July 2012 -Rs 4,100 million; October 2012 -Rs 5,350 million; January 2013 -Rs 3,000 million; and April 2013 -Rs 2,150 million.
The Ministry of Production sought approval of the ECC for PSM's funding requirement agreed by CCOR along with a disbursement schedule. It was also intimated that the Finance Division had agreed to the proposal. Later, it was stated that PSM needed immediate action to extract it from its existing financial problems.
Besides, it needed a commercial decision and commercial planning to achieve 100 percent capacity utilisation. It was also opined that utilisation of bailout package should be closely monitored, besides setting up key performance indicators. It was suggested that monitoring report on the proposed performance indicators may be submitted to the ECC on quarterly basis.
The ECC considered the Summary dated July 6, 2012, submitted by the Ministry of Production on financial assistance for PSM subject to the condition that key performance indicators for the PSM be se up by the Ministry of Production in consultation with the Finance Division.