Pakistan Steel Mills directed to sell inventory to settle debt

NBP should clear dues of foreign creditors against letters of credit, says Dar

ISLAMABAD: The government on Thursday directed Pakistan Steel Mills’ (PSM) management to partly settle its domestic liabilities by selling the inventory while also seeking a government-owned bank’s support to settle payments to foreign creditors.

Finance Minister Ishaq Dar gave these directives during a meeting held in Islamabad. Sources said Privatisation Commission Chairman Mohammad Zubair raised the issue of outstanding liabilities of foreign and local creditors in the sitting.



The meeting had been originally called to settle administrative issues between the Privatisation Commission (PC) and PSM management.



PSM had given its land on lease to the Port Qasim Authority for using as a coal dump yard. Consequently, the PSM management was accused of using proceeds of 157 acres of land in violation of the Economic Coordination Committee’s (ECC) directives.

The ECC had directed that the money should be used only for paying three-month salaries to the PSM employees. But the PSM paid salaries for two and a half months and used the rest of the money for other purposes.

Another allegation against the PSM management was that it provided inaccurate figures to the ECC. However, instead of addressing these issues, the meeting primarily focused on settling the dues of big firms.

The finance minister directed the PC and Ministry of Industries to coordinate and suggest measures to resolve the outstanding issues at the mill, according to a statement issued by the finance ministry after the meeting.

The PSM - country’s largest industrial unit - has been closed for the last one and a half year after Sui Southern Gas Company (SSGC) cut supplies over non-payment of Rs18 billion in outstanding bills.

Employees are also not getting salaries. They have been paid up to September 15, 2016.

Sources said Dar directed the PSM management to sell its remaining inventory to settle the outstanding dues of local creditors. The cost of production of the inventory was roughly Rs5 billion.

The industries secretary told the meeting that the inventory would be sold according to the laid-down procedure. However, the PC chairman sought a formal role for his commission in the sale of the inventory.



Earlier, the PC had barred the PSM management from selling the inventory after reports that the management used the money for other than intended purposes.

Sources said Dar also directed that National Bank of Pakistan should settle the dues of PSM’s foreign creditors against letters of credit opened for raw material import.

He was of the view that NBP and PSM issues should not affect Pakistan’s reputation at the international level, said Zubair while talking to The Express Tribune.

He said PSM owed money to a German company and the issue had also been raised by the German embassy in Islamabad.

To a question, Zubair said domestic liabilities would be settled only to the extent of the value of the inventory.

He said the timeframe for paying back dues of other creditors would be decided when the government would approve the transaction structure for giving PSM on lease.

He revealed that road shows for the PSM lease would be held next week in Karachi and Lahore.

PSM’s outstanding liabilities are over Rs150 billion. Of these, Rs51 billion comprises NBP loans, Rs10 billion worth of loans from other banks, over Rs40 billion in gratuity dues and SSGC’s bill of Rs40 billion that led to the suspension of gas supplies in June 2015.

The government recently gave additional charge of PSM CEO to a Grade-21 officer and Export Processing Zone Authority Chairman Mumtaz Ali Shah. He has been appointed till the process of PSM privatisation is completed.

Last month, the PC chairman had said that the government would give the PSM on a long-term lease and Chinese and Iranian companies showed interest. He had told to a wire news agency that the PSM would be given on lease for a 45-year period.

Published in The Express Tribune, December 2^nd, 2016.

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