1:50 AM
ISLAMABAD: With ‘shutdown plan’ of Pakistan Steel Mills also an option, the availability of its raw material on a precarious 20 per cent capacity utilisation has come down to only 15 days as the company struggles to keep the plant running and pay staff salaries.
“Under the prevailing situation it is not possible to run the affairs of PSM in the absence of any prompt financial assistance for procurement of raw material,” said an SOS call to the federal government by the executive committee of the PSM management, which is looking after its day-to-day affairs.
Seeking an urgent injection of Rs6 billion to procure raw material (coal and iron ore) on an emergent basis, the committee wrote to the government that “if required action for procurement of raw material is not initiated immediately, PSM may fall down to crunches and its revival thereafter will be difficult, even impossible.”
Officials said the company’s liabilities had increased to Rs61 billion and the salaries for October had not been paid to the staff as of Nov 23, except for a Rs10,000 per head Eid allowance.
The PSM has been under severe financial strain since last year.
Although the cabinet committee on restructuring (CCOR) had reconstituted its board of directors in January this year to turn around the country’s largest industrial unit, its operational and financial position has gone from bad to worse in the absence of a full-time chief executive.
The CCOR is expected to meet again on Friday to consider a business revival plan and provide some financial lease of life to the company.
Under the business revival plan, the government has been offered three options. In the first case, the government has to inject/arrange fresh financing of Rs20 billion, which would enable the corporation to turn its operations around.
“The other option could be for the government to continue offering an ad hoc assistance to the PSM of around Rs5 billion per annum, which would ultimately result in bankruptcy.”
According to the PSM management’s executive committee, “the third and final option is closure of the operations which will cost over Rs40.25 billion as immediate closure cost, besides its political implications, including making over 16,000 people unemployed.”
Under the revival plan, the government will provide fresh financing of Rs20 billion from 2012 to 2019 on commercial terms and pick up mark-up for the first three years amounting to Rs9.3 billion.
This will enable the PSM to finance its working capital and enhance its capacity utilisation while simultaneously discharging some of its past liabilities and financing capacity expansion to 1.5 million tons per annum. In this case, the government will receive Rs90.80 billion as sales tax on the sale of finished goods and Rs3.98 billion as income tax (turnover tax) over five years.
As things stand now, the PSM is failing to meet a minimum of 20 per cent capacity utilisation, below which the plant could stop operations and revival becomes technically impossible.
Since prices of coal and iron ore have fallen considerably, it is high time to procure raw material from the international market as in later part of the year procurement from Australia and Canada will be impossible due to severe weather conditions.
The PSM has been apprising the government of an inconsistent supply of raw materials in view of financial constraints.
“It is regretted that no fruitful results have been achieved, which has forced the management to operate the plant at low capacity utilisation, which has increased the financial losses of PSM. Salaries of the employees are not being paid timely and are being paid by stopping the payments of various bills of contractors, suppliers, medical practitioners, clinics and utility bills”.
“The PSM has a threat that employees may be deprived of the salaries and other benefits and also in payment of utility bills.
They may thus come out on streets and resort to agitation. This situation may cause embarrassment for the PSM management as well as for the government,” the PSM management concluded.
Posted in: NATIONAL
