Blast furnaces of steel mill are in danger

The Pakistan Steel Mill (PSM) management has informed the government that if the gas pressure is not restored immediately the blast furnaces of the mill will be difficult to revive and some other plants will also collapse causing loss of Rs 15 billion, an official source said.

In an official communiqué to the ministry of industries, the PSM management said: “Six months have elapsed since gas pressure reduction and the blast furnaces revival is getting out of hand with every passing day. If the required pressure and flow of gas is not restored, the blast furnaces will be difficult to revive and some other plants may collapse, causing loss of Rs 15 billion and requiring 3 to 4 years to restart the production.”

The company management has sought immediate restoration of gas supply and financial support of Rs 8.32 billion to revive the plant and continue the operations till June 30, 2016. It says a bill of Rs 6.72 billion will be booked even for a closed plant due to salary of staff and other expenditures. The management claims that the monthly expenditure will be met through the sale of inventory in hand and new production from available stocks of iron ore and coke and conversion of slabs.

It is important to mention that the K-Electric has gas liabilities of Rs 63 billion but its gas supply is never disrupted. The PSM has liability of Rs 36 billion to the Sui Southern Gas Company. The disconnection of gas for the last six months has caused an avoidable loss of Rs 12 billion to the national exchequer and no benefit to SSGC either as the PSM has not cleared the liability.

The matter had been reported to the government by the ministry of industries and further orders were awaited, the source said, adding that there was a dire need to inject capital in the company to keep it afloat for privatisation.

Other than the gas and electricity shortages, the PSM management attributes the delay in release of monthly funds out of Rs 18 billion bailout package approved by the government as a major reason affecting the revival due to working capital deficit. The approved funds were released after a month’s delay which resulted in iron ore supply by three months. The dumping of steel products by China further affected the mill performance.