Economic Co-ordination Committee (ECC) of the Cabinet is expected to approve two months' salaries (February-March 2016) for the employees of Pakistan Steel Mills (PSM) within a couple of days. The future of Pakistan Steel Mills is still undecided as Sindh government has not shown interest in acquiring the entity due to financial constraints. The federal government's deadline expired recently. Privatisation Commission will submit update to the ECC.
PSM situation (administrative, technical &'financial) went from bad (June 2013) to worse (June 2016) during the tenure of the present government and its losses plus payable liabilities mounted to Rs 385 billion (Rs 200 billion PPPP (2008 to 2013) plus Rs 185 billion as on May 31, 2016. The present government is responsible for more than Rs 185 billion on account of: (i) increase in losses, (ii) payable debts liabilities and (iii) increase of import bill on account of iron and steel items (not contributed by PSM), which is yet to be quantified (burden of foreign exchange) which impacted negatively on the balance of payment.
The local available facility and human resource was wasted by not appointing professional CEO and Board of Directors as IMF was informed in August 2013 by the government. An insider told Business Recorder that PSM has the potential to become a profitable organisation with investment of Rs 29 billion and its production capacity can be enhanced to 3 million tons per year with a further investment of Rs 60 billion, or so maintains the Financial Advisor appointed for valuation of PSM by PC.
The ECC in its meeting held on May 07, 2016 considered a summary moved by the Privatisation Division and approved payment of two months' salaries for the month of December, 2015 and January, 2016 to PSMC employees. The ECC further directed that PSMC may submit its request for further salaries in the month of June, after affecting cost deduction measures. In addition, it was also directed that the matter of additional funds, amounting to Rs 190 million to meet the day to day expenses of the PSMC may also be brought to the next meeting of the ECC of the Cabinet.
The sources said, in pursuance of the directives of ECC of the Cabinet, PSM management has taken a series of cost cutting measures, including a reduction in its employee's strength, especially the contractual and the daily wage employees. In doing so, the management of PSMC has envisaged that the daily wage employees would be reduced from 918 in November, 2015 to 400 by June, 2016, ie a reduction of approximately 50%, whereas, the contractual employees will also be reduced from 230 in November, 2015 to 161 by June, 2016 (a reduction of 40%).
In addition to these measures, the management has also encouraged the regular officers and staff to avail Earned Leave (E/L), Extra Ordinary Leave (EOL) without pay and has also stressed upon the employees to avail Leave Prior to Retirement (LPR) instead of encashment of leaves. Furthermore, POL, transport, electricity, gas and water bills have also been curtailed to a considerable extent keeping in view the operational capacity of the plant.
As a consequence of these initiatives, the salary bill for the employees of the PSMC has been reduced from Rs 435 million to Rs 390 million per month. Escalated salary for the month of February 2016 is due to Leave Fare Assistance (LFA) paid once a year as per term of employment (officers ) and union agreement (workers ) of 4500 employees regularised by the GoP in February, 2010. LFA is paid once every calendar year after completion of one year service. The cycle for grant of LFA will reckon from the date of appointment.
The production of PSM which contributes one per cent to the GDP per annum has been non-operational since June, 2015 when SSGC reduced gas pressure to the bare minimum. Since PSM has exhausted its finished inventory and it is also not permitted to sell its unfinished inventory without prior permission of PC, PSM requires Rs 190 million to pay its monthly expenses to keep the mill at the required heating mode.
Keeping in view Ramazan and forthcoming Eid-ul-Fitr, Privatisation Commission has submitted the following proposal to the ECC: (i) disbursement of salaries for at least two months from February to March 2016, before Eid, amounting to Rs 877 million (February Rs 476 + March Rs 401); (ii) release of Rs 190 million to PSMC, in addition to the salaries, to enable it to meet its day to day expenses or allow PSMC to meet the expenses by selling its unfinished and unsold inventory, currently worth approximately Rs 5 billion. The government has wasted more than Rs 185 billion in an attempt to privatise the PSM but did not approve Rs 29 billion for revival of PSM as requested by Ministry of Production from the ECC on August 22, 2013.