ECC approves Rs 18.5 billion cash injection for PSM

Govt aiming for comprehensive restructuring plan to revive PSM for privatisation in June 2015

The Economic Coordination Committee (ECC) on Friday approved Rs 18.5 billion cash injection for the Pakistan Steel Mills (PSM) for a comprehensive restructuring plan that aims to revive the PSM by early next year and a privatisation process that will start in June 2015.

The plan has been prepared by the Privatisation Commission. It is to be completed before the entity is privatised next year.

The money will be disbursed in three tranches over the next six months to procure raw material for the PSM, which is currently at standstill. It will help the mill run at a capacity. The move is aimed at boosting the price of the mill before it goes under the hammer.

Spelling out the restructuring plan, the privatisation commission chairman said that Rs12.5 billion out of Rs18.5 billion will be released immediately. Of this Rs9 billion will be used for the purchase of raw material, while Rs3 billion will be paid to National Bank of Pakistan for an additional Letter of Credit facility to purchase raw materials. The aim is to to achieve the production capacity of 30 per cent by August this year.

Privatisation Commission chief Muhammad Zubair said the cash-flow plan for PSM will be prepared next week in consultation with Ministry of Finance.

Zubair said the strategy adopted over the past year was no longer feasible to improve PSM’s situation.

Currently the PSM plant is running between three to six per cent of its installed capacity because sufficient raw material is not available owing to shortage of funds.

A second tranche of Rs3 billion will be released in mid-September, provided PSM achieves its initial goals. Out of this, Rs1 billion will be for enhancement of LC facility, which would help PSM in achieving 60 per cent production capacity by November 2014.

In mid-December, after a second performance evaluation, the third tranche of Rs3 billion will be released. Out of this, Rs2 billion will be used for enhancement of LC facility.

Zubair outlined that at the end of the restructuring, the PSM should be able to achieve 77 per cent production capacity and turn a profit of Rs230 million from January 2015 to June 2015.

The privatisation commission chairman said that from June 2015 onwards, the PSM will be able to pick its non-salary expenses and by that time the government would be in a position to start its privatisation process.