Pakistan Steel Mills (PSM) has reportedly sought federal government''s permission to arrange financing facility of up to Rs 3 billion against mortgage of 1400 acres of land in the vicinity of the mills, well informed sources in Ministry of Industries and Production told Business Recorder. Giving the details, sources said, on April 25, 2014, ECC approved Business Plan of Rs 18.5 billion including achieving target capacity utilization.
CAPU target for March 2014, was 5 percent, June 14, 5 percent, July14, 20 percent, August 14, 30 percent, September 14, 40 percent, October 14, 50 percent, November 14, 60 percent, December 14, 70 percent and January to June 2015, 77 percent. However, the mills could not achieve capacity utilization due to delay in disbursement of funds and later availability of Iron Ore by 3 months. On 21st November, 2014, BoD of PSM approved the business plan that PSM management presented as a summary in ECC through MoI&P and PC, for additional package of Rs 4.5 billion to make up for delayed release of funds for iron ore and make Business Plan successful.
The summary was presented by MoI&P in ECC on February 28, 2015 in which only two months'' salary was approved and Privatisation Commission was advised to present the PSM summary. Further ECC of the Cabinet constituted a committee comprising Chairman, SECP(Convener), Chairman, Privatization Commission, Secretaries Finance & Industries and Production Division to look into reasons for not meeting timelines by PSM for achieving 77% capacity utilization by January, 2015 and submit a report for the consideration of ECC of the Cabinet in its next meeting.
The 3rd and final meeting of ECC committee held on 15th April, 2015 deliberated on the matter and agreed as follows: (i) in view of urgency of the matter the Privatisation Commission in liaison with Ministry of Finance may take up the matter for release of 4 months'' salary for PSM employees ie January-2015 to April-2015; and (ii) PSM would submit a revised realistic operational plan to PC containing exact funding requirement based on assumptions along with detailed break-up. PSM agreed to forward to Privatization Commission the matter of levy of duty on import of Boron Mixed HR material and its working papers were to duly incorporate the reasons for PSM failing to achieve agreed CAPU as per ECC meeting of April-2014.
The PC put up the summary to ECC on April 23, 2015 which in turn approved two months'' cash salary for the month of January, 2015 and February 2015 and again advised PC to submit a realistic operational plan for consideration/approval of PSM Board, and subsequent consideration of the PC ie ECC did not accede to the initial approval of Ps. 4.5 billion approved by PSM Board on 21st November, 2014.
The Board in its meeting held on April, 2015, discussed a revised operational plan and approved it in pursuance of directives of ECC in its meeting held on April 23, 2015. The plan duly approved by the Board was forwarded to ECC through Privatization Commission/ MOI&P on 30th April 2015. The ECC took up the matter in its meeting held on 17th June 2015 and accorded approval only to release of salaries for two months ie March and April 2015 and directed Chairman NTC and Chairman FBR to consider their cases and provide a level-playing field to PSM, ie, again ECC did not accede to the release of working capital amounting to Rs 2.7 billion for payment of utility bills (Rs 1 billion), and Rs 1.5 billion for clearance of NBP default LC to procure coal and iron ore after August, 2015.
According to sources, the liquidity position of PSM further deteriorated due to non-liquidation of finished goods inventory because of cheap imports and boron steel from China and funds not provided by GoP required in the above revival operational plan. The condition further deteriorated due to a further reduction of natural gas pressure from SSGC which has lowered the capacity almost to zero level. However, capacity utilization achieved is as follows: May-2015, 23.2%, June-2015 7.7% and upto July 20, -2015, 1.8%.
PSM wrote various letters and made presentation to MoI&P, PC and MoF for support of working capital to maintain supply chain, as initially approved by PSM Board on November 21, 2014 and ECC has still not acceded to the working capital request of PSM management despite the approval by the PSM BoD. The PSM management as an option has sought permission from the federal government to arrange financing facility amounting to Rs 1 billion to Rs 3 billion against the mortgage of about 1,400 acres of land in the vicinity of PSM shown as investment property in audited accounts.