Pakistan Steel Mills (PSM) has reportedly been denied an approved bailout package of Rs 11 billion after the caretaker Prime Minister, Mir Hazar Khan Khoso, backed out of an earlier commitment, sources close to the Minister for Industries and Production told Business Recorder on Friday. Official documents obtained by this correspondent showed that the Prime Minister had directed the Ministries concerned on May 8 this year to finalise the bailout package by May 9 and submit a compliance report.
However, the package which was discussed in at least in three meetings by the Prime Ministe,r has been trashed just after two weeks. "It has been desired that the case on 'support need from the Government of Pakistan (GoP) for revival of PSM' may be placed before the next government," sources quoted Principal Secretary to the Prime Minister, K.M. Siddiq Akbar as saying in a letter to the Ministry of Production.
The Principal Secretary to the Prime Minister dispatched replies to the Ministries concerned after getting consent of the Prime Minister. Minister for Industries and Production Shahzada Ahsan Ashraf Sheikh has on numerous occasions taken credit for the approval of the bailout package. PSM employees, meanwhile, had not been paid salaries for the past two months.
Documents further stated that a meeting presided over by the caretaker Prime Minister on May 8, 2013 took the following decisions: (i) PSM will open Escrow account with the National Bank of Pakistan for provision of Rs 11 billion as working capital for PSM through a consortium of banks; (ii) operate L/C facility of Rs 3 billion through Escrow Account to be provide by the NBP; (iii) salary, provident fund, gratuity, health bill, payment of utilities, plant maintenance and emergency expenditure will be protected by Ministry of Finance. That Division will also provide necessary guarantees for their in time payments, while operating Escrow Account;(iv) Finance Division to facilitate the restructuring and rescheduling of loan Rs 4.2 billion with a view to enable PSM to continue its operations;(v) Finance Division to Ministry of Petroleum and Natural Resources will work out a mechanism for clearing the current liability of the SSGC towards PSM, in order to facilitate PSM operations and ;(vi) Finance Division will facilitate the proposal of conversion of the loan to preference shares with the NBP and resolving of taxation issues with Federal Board of Revenue (FBR).
An official said that an NBP-led consortium was reluctant to extend such a huge amount to PSM in the light of a Supreme Court decision. The consortium, the official said, was of the view that caretakers were "not mandated to approve such packages".
Earlier, former Secretary Finance, tipped to be the new Principal Secretary to the Prime Minister, refused to give out the bailout package on the recommendation of the caretaker government. The Ministry of Production also proposed to the government to privatise PSM or close it in case fresh injection of funds was not possible.
Sources in PSM from Karachi told this correspondent that the Executive Committee of Management Cell (ECM) in its meeting held on May 30 this year had deliberated on the acute financial crunch being faced by PSM which threatened the continuation of the Mills' operations and passed the following resolution:
"In view of the continuing financial constraint faced by PSM, the Government was requested for bailout package. The Government on May 8, 2013 had approved a one go bailout package of Rs 11.00 billion through a consortium of banks led by NBP and additional Rs 3.0 billion L/C facility from NBP. However, no fund has so far been released due to which PSM is not in a position to pay the salaries of its employees for March and April this year and even current bills of SSGC and KESC, who are threatening to cut off the gas / electricity supplies in case payment is not made immediately. "ECM is of the considered opinion that in such an eventuality ie curtailment/stoppage of these supplies, the situation cause to irreversible damage to the plant and machinery resulting in huge and incalculable losses in billions of rupees".
ECM also observed that the prices of raw materials such as iron ore and coal are falling steadily in the international market. The continued delay in release of funds "is preventing PSM to benefit from the prevailing rock bottom prices of iron ore and coal".
ECM resolved that the Government should "intervene and order immediate release of funds against the current bailout package to avert the present crisos, which would be a national catastrophe if PSM is forced to shut down its operations due to stoppage of gas and electricity as is being threatened by SSGC and KESC. Besides, the social cost of stoppage of PSM operations will be tremendous resulting in unrest among the affected work force".
The meeting was attended among others by Iqbal Ahmad Qureshi GM Incharge(TS), Saud Ahmad Khan ACFO/ GM ( cost and accounts), Capt Shamsi Hassan(retired) APEO( P&S/A&P), Absar Nabi APEO( Production), Pervez Iqbal PAEO(BMR&E)/ Secretary -ECM, Hamid Pervez APEO( Commercial ) and Wasif Mehmood(PEO(HRD).
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