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ECC to consider PSM package today

The Economic Co-ordination Committee (ECC) of the Cabinet is to consider Rs 26.5 billion pre-privatisation package for the ''technically shut'' Pakistan Steel Mills (PSM) on Wednesday (today). The package includes Rs 11 billion GoP guaranteed, non-cash, 120-day LC with NBP for raw material procurement, Rs 4.2 billion to retire NBP old LC liability with accrued interest and Rs 12.3 billion for working capital and an old LC liability.

The sources said PSM Board in its meeting on November 5, 2013 deliberated on the following way forward options formulated by the board committee with pros and cons: (i) temporary closure for 15 months till privatisation; (ii) winding up (closure through liquidation); (iii) let it bleed or status quo; and (iv) turnaround with restructuring.

Shafqat Naghmi Secretary MoI&P and Chairman of the Board, confirmed that GoP remains committed to PSM privatisation in the foreseeable future. He gave the following guidelines to the Board: (i) park all loans into a separate company owned by GoP; (ii) the committee should develop a re-structuring proposal and rationalise the manpower by way of GHS with financial implications; and (iii) PSM should develop an integrated financial model for a holistic view. The sources said production capacity of PSM is at 1.36 percent due to shortage of material (zero inventory of coal). The Mill''s PF liability has been calculated at Rs 12 billion and non-funded gratuity at Rs 18 billion.

According to sources current liabilities are 3.6 times the current assets and debt and equity ratio is minus-zero. Manpower is 16,000+, that is, 61 MT per employee, as opposed to an average of 275 being the regional benchmark. PSM management maintains that the 30 year old PSM plant requires recurring CAPEX for rehabilitation to attain 80 percent+ production capacity with no guarantees.

Copyright Business Recorder, 2013