Pakistan Steel Mills (PSM) which is going through severe financial crisis is also losing local raw material for manufacturing steel products due to its duty free exports.
As a large quantity of raw material is being exported by the local producers without any hindrance, PSM, the country’s only steel manufacturing institution, is fast losing local supply, forcing it towards further losses and lower production, sources told Profit.
Citing reasons for the increasing exports of raw material of steel products, they said as the exporters and producers are paid the price and other expenses by the importers without any delay, they prefer to sale the products outside the country. Lack of any duty on exports of the material is another factor encouraging more exports despite the fact that PSM was in dire need of them under the present situation. The finically strapped organisation was now depending more on locally produced raw material as it was unable to pay for huge imports. “India has duty on the exports of the same material, but in Pakistan the exporters are given a free hand to sale the valued raw material,” they added.
While the mill was currently being run on below 20 per cent capacity in view of the shortage of raw material, the decrease in local supply could further force the mill towards billions of rupees worth losses in near future.
According to sources, the management of PSM has also requested the concerned authorities to take notice of the increasing trend of exports and control it through imposing duty as done by India to save the mill from further losses. For the last three years, PSM was facing raw materials shortage due to financial crisis. PSM needs coal, iron ore, fine and lump as raw materials which are mainly imported from Canada, Australia, Germany, India, etc, for making steel.
PSM sales and production were gradually decreasing while loss was increasing because of acute shortage of raw material and poor performance of its plants. In order to bring back the mill to a profit giving organisation, sources said, PSM should be given the required bailout package besides controlling the exports of raw material. PSM was facing loss of billions of rupees. It has to pay off huge bank loans and government taxes. It was, in fact, on the verge of collapse and bankruptcy and if the Rs10-12 billion rupees bailout package was not given to the organisation it was fared that the production level could reach to a mere 10 per cent. Besides the shortage of raw material there were many factors for the current crisis in PSM including, low capacity utilisation, liquidity crisis, rise of cost of coal in the international market, mismanagement on the part of the administration and political involvement and interference from the government side.