The government is undecided about privatising the financially troubled Pakistan Steel Mills (PSM). The entity needs an injection of over Rs 100 billion for restructuring and revival before it can be put for sale within 12 months.
According to a media report, the government has realised that the accumulated liabilities of PSM are too big to be met through the sale of its current assets and any financial commitment to its revival carries a high degree of risk.
It is also considering carrying out a technical audit of the machinery and plants to verify claims that with financial support the mill would be able to run at 80% of its capacity, compared to the current 3%.
The audit would not only determine the status of the machinery but also suggest whether aged plants would be attractive enough for potential investors.
The report said that five options were placed before the Economic Coordination Committee (ECC) of the cabinet in a meeting on January 16. These included maintaining the status quo, selling assets, making attempts to revive the mill with no decision on privatisation, keeping the mill ticking and privatising within 12 months, or restructure and revive and privatise in one year.
In order to opt for this option, the government would need to pump Rs19.1 billion into PSM in a single tranche, provide sovereign guarantees (non-cash) for 120 days of letters of credit with National Bank amounting to Rs11 billion, undertake financial restructuring through parking Rs50.712 billion, offer voluntary separation scheme to 4,000 employees worth Rs14.167 billion and waive SSGC surcharge worth Rs6.56 billion.
