Pakistan Steel Mills (PSM) CEO Major General Muhammad Javed (Retired) has warned that the ''bleeding'' mill will shut down immediately if an amount of Rs 2 billion is not arranged from Pakistan Industrial Development Corporation (PIDC) as loan for procurement of raw material and payment of utility bills, sources close to the CEO told Business Recorder from Karachi.
Minister for Production & Industries, Shahzada Ahsan Ashraf Sheikh visited Pak Steel on April 19, 2013. The prevailing issues of PSM were discussed with the minister, particularly the liquidity crunch/availability of raw material. The minister was told that the present crisis is due to non-availability of sufficient funds for procurement of the essential raw materials ie coal and iron ore.
According to the CEO, liquidity crunch of Pakistan Steel was a bit eased as a result of L/C facility of Rs 3.0 billion by National Bank of Pakistan. Pak Steel was able to manage two ships of coal and one iron ore. The production capacity had been increased from 15 to 30 percent, but PSM needs smooth supply chain of raw-material to further enhance the production capacity. This is essential to minimise the losses and to move forward towards breakeven/profitability.
He further stated that caretaker Prime Minister has considered the issues of PSM in the briefing given to him on 11th & 12th April 2013 in which Secretary MoP and Secretary, Finance were also present. Bailout request of PSM for Rs 20 billion is under study by a high powered committee nominated for the purpose. In the meantime, to meet immediate requirement an amount of Rs 2 billion is required for procurement of coal and payment of utility bills. In case funds are not arranged immediately, PSM operations will badly affect, which will result in additional losses to the organisation, hence losses to GoP. It is also likely that we may be left with no option but to shut down the mill which will be a colossal loss to the economy of Pakistan.
"Under the circumstances, the CEO has suggested that a loan amounting to Rs 2 billion from PIDC may please be arranged for procurement of coal and payment of utility bills. The repayment of loan will be made from release of bailout of Rs 20 billion by GoP or PSM will repay the loan in monthly instalment of Rs 100 million commencing from October 2013," the sources added.
CEO is of the view that an early arrangement of loan proposal with PIDC will help maintain and improve the production capacity of the mill and it will help the state owned organisation from further heavy losses. "The PSM management is confident that the gesture will be shown by PIDC management and will accede to our request to meet out financial needs which will be returned within a few months. This help would play a very vital role in the revival of PSM for which the workforce of PSM will be grateful to PIDC management," the sources concluded. The government had given a bailout package of Rs 14.5 billion to PSM which has already been spent. The mill is running on Rs 50 million financial loss on a daily basis.