The Economic Co-ordination Committee (ECC) of the Cabinet which is scheduled to meet on Thursday (today) will approve payment of salaries to the employees of Pakistan Steel Mills (PSM) and Pakistan Machine Tool Factory (PMTF), Karachi, well informed sources in Ministry of Industries and Production told Business Recorder. Both the entities are on active list of privatisation programme but Privatisation Commission (PC) clearly has not expedited the process due to several reasons.
Giving a background of the PSM issues, the sources said, ECC of the Cabinet on April 24, 2014 considered a summary submitted by the Privatisation Commission on "Restructuring options of the Pakistan Steel Mills" and approved the grant of Rs 18.5 billion bailout package to the PSM, with a view that at the time of privatisation, PSM shall be in a running condition and that it shall achieve 77 percent capacity utilisation by January 2015. The restructuring plan was based on achieving tangible milestones of progressively increasing capacity utilisation with resultant impact on sales and profit/loss.
However, due to several reasons, PSM failed to achieve the agreed capacity utilisation since the ECC meeting of April 2014. PSM management has given five justifications for not achieving the capacity targets top of which is reduction in gas pressure. Thereafter, the ECC of the Cabinet on June 17, 2015 considered the summary submitted by the Privatisation Commission on "Restructuring Options of PSM", which included a revised operational plan, duly approved by PSM''s Board on April 30. The summary also contained a proposal of additional funds amounting to Rs 6.4 billion, to meet the targets of the proposed operational plan. However, after detailed deliberations, the ECC of the Cabinet only accorded approval to release salaries for two months, ie March and April 2015. Since then, the liquidity position of PSM has further deteriorated, as PSM has struggled with the disposal of its finished goods inventory. PSM has claimed that it is unable to match the prices of its finished products with similar cheap imported products, available in the market from China. Furthermore, the reduction of natural gas pressure by SSGC has also impacted the slab inventory, worth, more than Rs 4 billion, as the capacity utilisation dropped to almost zero (one percent) by end August, 2015.
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