Bailout package does nada for PSM


If officials at the Pakistan Steel Mills (PSM) are to be believed the cash-strapped federal government has not hit the bull’s eye when it comes to the usage of a bailout package of billions to keep the loss-making public sector entity afloat. On July 23 this year, the resource-constrained federal government had declared a bailout package of Rs 14.6 billion to be injected into the Mill in three installments.
Whereas so far two installments worth Rs 8.8 billion have been released, Rs 3.8 billion in August and Rs 5 billion in December, to the PSM, the injection of billions seems to have served its purpose not at all.
According to well-placed officials at Pakistan Steel, the Mill’s production of steel was persistently depleting and had contracted from 82 percent in July 2008 to 17 percent during the current month, December 2012. Further, the entity is making a loss of Rs 1.5 billion every month.
The PSM officials claim that the government’s fresh bailout package would, at the end of the day, go to waste as a major chunk of the public money was being sucked up by the banks on account of interest and liabilities.
The PSM’s liabilities, the officials said, amounted to Rs 85 billion which had piled up over the last four years during which the Mill registered a total loss of Rs 80 billion.
The government did not take any serious measures turning a profitable entity into a continuous loss maker unit which has gained profit of about Rs 20 billion from 2000 to 2008 and now go to a loss of Rs 80 billion in just four years with Rs 85 billion liabilities.
Whereas the economic managers are prioritizing other needs, the supply of raw material, a PSM official said, was the factor that would once again turn the entity into a profitable enterprise.
“The monthly loss of Rs 1.5 billion is on account of lower output and increased operational cost.
Pakistan Steel facing a serious shortage of raw material from last four years,” said the official adding that the PSM had been plagued by such a worse condition since 2009 when the raw material supply chain had interrupted.
While the PSM is hardly managing to import raw materials like iron ore and coal the government was releasing the bailout money in what the officials described it “piece meals”.
Recently, a ship carrying 55,000 metric tons of Australian coal arrived at the Steel Mill jetty of the Port Qasim with the Mill declaring to have started finalizing tenders for the import of over 0.1 million MT ofimported iron ore.
“But, for raw material the PSM just got only about Rs 3 billion which is the main need of the Mill to revive and survive,” said the official adding “Other amount was taken away by the banks against the interest and liabilities”. Other secondary category raw materials like dolomite, limestone are, however, available in the PSM stock.
For an uninterrupted supply of raw material, the officials said, the PSM needed at least Rs 25 billion and that too in a single installment.
“We are for last three years demanding Rs 25 billion, but the government is providing money in piece meals that could never produce proper results due to operational expenses and break in the next installment for purchasing raw materials,” they said. The officials also complained of misappropriation of the taxpayers’ money by the current PSM management in the face of politically-motivated inductions and the grant of Charters of Demand to appease the People’s Workers Union-led CBA.
Such cost-intensive measures, they said, were adding billions to the loss-making Mill’s operational cost.
Unable to estimate the volume of PSM’s current operational expenditures, the officials said despite huge losses the PSM management and its Board of Directors on a “political pressure” had hired some 5000 employees as well approved two Charters of Demand to the CBA. “The same demands cost the Mill around Rs 3 billion in 2008 and Rs 2 billion in 2010,” recalled the officials.
Moreover, the officials said the government had also been unable to swiftly respond to the Supreme Court’s suo moto notice and the consequent verdict on the Mill’s corruption cases.
“There is still no good progress on the Supreme Court’s suo moto action against the PSM corruption cases,” they lamented.
The apex court’s action, the officials said, was widely seen as a hope for the recovery of a huge amount embezzled by the past managements. The looted money, they said, amounted to Rs 22 billion.
When contacted a PSM spokesman refrained from commenting on the above statements. He, however, said the prevailing international market conditions for steel were very favorable for Pakistan.
He said once the supply chain of raw material was restored the PSM would take not more than 18 months to come back on tract.
“The market condition is so good for the PSM that once raw material supply chain is restored the PSM would reach to profit line within next 18 months, God willing,” the spokesman said.
He, however, said international hurdles like the US sanctions on Iran, one of Pakistan Steel’s hottest picks for the import of iron ore, were creating difficulties for the PSM management to procure cost and time effective raw material.
“Importing iron ore from neighboring Iran is easier thus economical than to purchase the same from far-located Australia, Brazil, or Canada as shipments from these destinations take quite a long time to reach Pakistan Steel,” he added.
PSM delegation leaves for Iran to discuss iron ore import

A four-member delegation of Pakistan Steel Mills (PSM) Saturday flew to Iran on a four-day visit that would see the PSM chief explore the ways and possibilities to procure iron ore for Pakistan Steel. According to a PSM spokesman, Major Gen (Rtd) Mohammad Javed, Chief Executive Officer of the PSM is leading the delegation that includes member board of director and conveynor Price Committee Engr. Abdul Jabbar, Member board of Pakistan Steel Nayyar Hussain Bukhari and General Manager Bulk Material Department Pakistan Steel Captain(R) Shamsi Hasan. He said the main purpose of the visit was to finding possibilities for supply chain restoration of iron ore to Pakistan Steel, from Iran. He added that PSM is facing difficulties from importing iron ore from Australia, Canada, Brazil etc as it takes about 50-60 days long journey, expensive freight rates than a 10-12 day cost effective journey from a neighboring country. He said that PSM delegation will meet 5 Iranian companies in this visit and also discuss a way out option through a barter deal for Iranian iron ore with metallurgical coke which is produced by Pakistan Steel.