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ISLAMABAD: The federal government is to publish a Letter of Intent (LoI) of Pakistan Steel Mills (PSM) at the end of current month as proposal to settle National Bank of Pakistan (NBP) loans and Sui Southern Gas Company Limited (SSGCL) bills will be settled by the Cabinet Committee on Privatisation (CCoP) next week, well-informed sources told Business Recorder.

The government has already approved the setting up of a subsidiary company of PSM to transfer its liabilities, aimed at its privatisation.

PSM has been dysfunctional since June 2015 due to disconnection of gas. Its liabilities and losses are around Rs 600 billion (Rs 290 billion liabilities and Rs 300 billion losses). SSGCL has refused to waive the Late Payment Surcharge (LPS) on its books to make it ready for privatisation. The sources said Privatisation Commission will submit a Scheme of Arrangements (SoAs) to the Securities and Exchange Commission of Pakistan (SECP). Prior to submission of SoAs to the SECP, all the corporate actions like evaluation of assets, establishment of subsidiary and registration with SECP, approval of audited accounts PSM till June 30, 2020 and December 31, 2020 from the Board of Directors (BoD), No Objection Certificate (NOC) from National Bank of Pakistan and SSGCL regarding clearance of liabilities and payment plan approved by the ECC have been met.

According to sources, PC will be requesting the ECC that GoP should give a guarantee against NBP loans so that these loans are not reflected in the books of subsidiary company.

“When eight/ten corporate actions are completed, PC formulates a Scheme of Arrangements and submits to the SECP, which gives the go ahead for privatisation of the entity,” the sources maintained.

The subsidiary will have clean accounts whereas PSM’s plant and machinery and 1230 acres of land will be in its name, the sources continued.

Presently, four consortiums are interested in rehabilitation/privatisation of PSM, of which two consortiums are from China, and one each from South Korea and Russia. Pakistanis are also part of the consortium.

The figures of losses and liabilities of PSM presented by different government functionaries do not match.

The Prime Minister has claimed that liabilities of PSM stand at Rs 350 billion, Minister for Industries and Production Hammad Azar claims liabilities are of Rs 230 billion, PSM retrenchment letter says liabilities are of Rs 212 billion whereas the transaction structure committee liabilities give the figure of Rs 302 billion.

PSM has already retrenched over 4500 employees in the first phase after formal approval from the Federal Cabinet and now preparations for the second phase are underway as the government wants to give PSM to investors without any liability.

The CCoP in its meeting held on December 10, 2020 approved "transferring of identified core operating assets into wholly owned subsidiary of PSMC through Scheme of Arrangement (as provided in the Companies Act 2017) followed by sale of majority shares of the newly formed subsidiary (without transferring of full ownership) to strategic private sector partner."

During the ensuing discussion, Chairman CCoP emphasized the need to expedite the privatization process to ensure that, at least, some of the ongoing transactions are completed before the end of current financial year.

“If LoI is published at the end of current month, then PC will be in a position to offer PSM for bidding by June 2021,” the sources further added.

The incumbent management of PSM recently extended the contracts of top security officials at exorbitant perks and privileges despite the fact that the incidence of theft of PSM’s materials is on the rise. The Board is reluctant to take any decision due to fear of National Accountability Bureau (NAB). The evaluation of PSM’s land is a headache as no renowned evaluator is ready to accept the “challenge”.

Copyright Business Recorder, 2021