Rs 11 billion Business Plan loan from NBP: PSM seeks GoP nod for release of remaining Rs five billion

The Pakistan Steel Mills (PSM) has sought a Letter of Comfort (LoC) from the Government of Pakistan (GoP) for disbursement of the remaining loan of Rs 5 billion from the National Bank of Pakistan with the objective of implementing the Business Plan of Rs 11 billion.
PSM Secretary Absar Nabi, in a letter to the Federal Government stated that the term sheet of Rs 6 billion term loan duly agreed by Ministry of Finance, Ministry of Production, National Bank of Pakistan (NBP) and PSM was sent to MoF for concurrence on December 22, 2011.
According to him, Business Plan and summary were presented to the ECC by the Ministry of Production. Following steps must be taken now for successful implementation of the plan: (i) Ministry of Finance and Economic Reforms Unit (ERU) should be requested to make arrangement for the disbursement of remaining Rs 5 billion term loan on the same terms and conditions as approved in the business plan ie government to pick up interest cost for the first three years; (ii) Letter of Comfort for remaining Rs 5 billion should be issued by the Ministry of Finance at the earliest on the same terms and conditions in line with the Rs 6 billion term loan which has already been agreed by the Ministry of Finance, Ministry of Production, NBP and PSM; (iii) Federal Board of Revenue (FBR) should be requested to issue input sales tax exemption at the earliest; and (iv) Ministry of Production should be requested to advise Sui Southern Gas Company Limited (SSGC) to waive surcharge, amounting to Rs 1.2 billion, on bills to PSM. Further installments of Rs 4 billion outstanding should be made as follows: (a) amount payable Rs 4 billion; (b) number of installments 36; (c) amount of installation -Rs 111 million; and (d) first instalment due on July 12, 2012.
PSM Secretary further stated that on release of Rs 6 billion, NBP will adjust an old L/C due and payable by PSM amounting to Rs 1.6 billion, thereby leaving a balance of Rs 4.4 billion which will not be sufficient to restore the raw material supply chain.
"I request the MoF that an amount of Rs 5 billion should be released in time in order to maintain the chain of raw material and keep the mills in operation at required level so as to head towards break even and profitability," the PSM Secretary maintained.
While seeking effective financial structure, Secretary PSM said that the matter of equity injection had been discussed by Asad Ali Shah with the Finance Minister and in presentation at the Prime Minister House, which should be considered for better financial structure. NBP has out rightly rejected PSM''s proposal for review of borrowing cost of Rs 7.6 billion loan and rescheduling fee.