After being informed that the banks have flatly refused to provide any loan to the loss making Pakistan Steel Mill (PSM), the government decided to provide a sovereign guarantee for Rs6 billion loan, to keep the entity operational till its financial restructuring, business plan is approved.
An official source said the decision was made at the Cabinet Committee on Restructuring, chaired by the Finance Minister Abdul Hafeez Shaikh on Friday. PSM, the source said, decried during the meeting that no bank was ready to give loan to the state owned entity which was faced with a loss of Rs1 billion per month due to under capacity operations. The steel mill is operating on only 20 per cent production, even though a production level of 70 per cent was required to reach break even. It was pointed out that there was shortage of raw material and if imports were not made immediately the mill would close down. The restarting would be more expensive than the financial assistance sought at present. The committee decided to provide guarantee to banks to enable raw material procurement.
The committee was informed that an assistance of Rs11 billion was required to enhance the production output to 80 per cent that will make the entity profitable. It will also require long term restructuring of debts. When some ministers expressed concerns on the financial plan, the committee was informed that PSM was a profitable entity during 2001-2008 period. It suffered heavy losses during the tenure of the present government. CCOR directed empowering of the board of directors of PSM to make them more accountable and rationalising the custom duty on the raw materials. It was decided that the five year business plan will be considered by the Economic Coordination Committee of the cabinet for final decision. The approval of the new business plan is required to conclude an investment deal with Russia that has assured an investment of $500 million in the upgradation of the steel mill. The mill has production capacity of 1.1 million tonnes which would be increased to 1.5 million tonnes. The company has 17,000 employees and their salary bill is more than Rs700 million per month. PSM incurred loss of Rs26 billion in fiscal year 2008-09, Rs11 billion in 2009-10 and Rs11 billion in 2010-11. The government helped the entity by rescheduling its loans of Rs7 billion and providing cash assistance of Rs3 billion in the fiscal year 2009-10 while it helped in restructuring loans of Rs8 billion and injected a cash assistance of Rs2 billion in 2010-11.
This is good decision taken by the government. It must be good for them.
This is the worst decision taken by the government to keep a dying horse alive by feeding on tax payers money, an indirect measure to keep people poor by wiling away their hard earned money they give to the government in the form of taxes. Govt run the industry like a typical Govt Department, which is full of corruption, inefficiency. It is none of Govt job to run industry and trade. This is exclusively job of private sector. Govt should privatize in one stretch, all such entities like PSM, PIA, Railways etc. And should disband institutions like Pakistan Utilities Corporation, TCP. They will do a great service to the public by doing so.
our tax payers money go to keep white elephants alive and to fill the treasury of govt functioneries.
the Current CJ is responsible for PSM mess. He stopped the privatisation of PSM..and now the tax payers have to pay to keep this white elephant alive.
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