Ministry of Industries and Production (MoI&P) has reportedly sought supplementary grant of Rs80 million from the Finance Ministry through the Economic Coordination Committee (ECC) of the Cabinet to clear Sui Southern Gas Company (SSGC) dues meant to avert total gas disconnection of Pakistan Steel Mills (PSM).
Sources close to Prime Minister Advisor on Commerce, Industries and Production and Investment told Business Recorder that the decision to submit a summary to the ECC in this regard was taken at meetings held last week.
SSGC's total receivables against PSM stood at Rs62 billion of which around Rs22 billion is the principle whereas Rs40 billion is interest on late payment. PSM argues that it has to pay the interest on late payment in accordance with gas rates fixed under the Gas Sale Purchase Agreement (GSPA) whereas SSGC is seeking interest as per OGRA tariff, which is unjustified.
Officials in the Ministry of Industries and Production confirmed on a number of occasions that PSM is inflicting Rs1.5 billion financial loss per month to the national exchequer. On the basis of this calculation, it can be assumed that Rs20 billion financial loss has been inflicted on the national exchequer.
Unofficially it has been revealed that total liabilities and loans of PSM stood at Rs500 billion as of December 31, 2019. According to sources a meeting was held between the officials of Petroleum Division and Chairman PSM/ Ministry of Industries and Production and Privatisation Commission on the prospect of gas disconnection. SSGC is supplying two or three MMCFD gas to PSM meant for the coke oven.
During the meeting, sources said, it was decided that PSM will pay current bill of Rs80 million to avert total disconnection and if this does not happen another way out of this issue will be found.
"If PSM continues to pay current bill, there will be no disruption in gas supply meant for the coke oven batteries," the sources said adding that Petroleum Division has also written a letter to the SSGC Board to approve the proposal.
Last week, Privatisation Commission's team led by the Minister, Mohammad Mian Soomro and Ministry of Industries and Production team comprising Prime Minister Advisor on Commerce, Industries and Production and Investment held a detailed meeting on the issues of PSM and reasons for the delay in hiring Financial Advisors (FAs).
The sources said, all current issues with respect to revival of PSM came under discussion in the first session sans Chairman PSM Board, Aamir Mumtaz who did not attend the meeting due to a flight delay.
Another session was held between the Secretary Privatisation and Secretary Industries in the presence of Chairman PSM Board.
An insider revealed that the Privatisation Commission's team took Ministry of Industries and Production's top brass into confidence on the latest development on hiring of Financial Advisor's consortium. The meeting evolved a consensus on future steps to be taken with respect to revival of the PSM.
The source said, there is a general consensus with the stakeholders that PSM should be revived under Government to Government agreement aimed at avoiding litigation or on any other issue. For this purpose, Chinese and Russian companies have already visited the mills. However, the foreign companies want substantial incentives.
PSM audited accounts and balance sheets from 2015 to December 2019 are not available to any independent observer and additionally these accounts have not been verified by the Auditor General of Pakistan. Pakistan Steel Mills debts and liabilities have already touched Rs515 billion from July 2008 to December 2019
Chinese and Russian companies have visited different sections of PSM's prior to submission of their Letters of Interest (LoI) on government to government basis.
Prime Minister, sources said, has given a deadline of March 31, 2020 to make PSM ready for revival but progress is not as per expectations. However, Privatisation Commission is of the view that there has been a lot of development on PSM's transaction.
"Privatisation Commission has taken Ministry of Industries and Production and PSM Chairman on board on entire developments," said PC spokesperson when contacted.
On December 27, 2019, PC Board did not approve the much talked about Financial Advisors (FAs) for the privatisation/revival of PSM due to differences on some clauses of the agreement as the PC has to pay the FAs on firming up of deliverables.