Pakistan Steel Mills (PSM) has requested the government to immediate inject Rs17 billion worth of equity to restore the company’s choked supply chain.
Sources maintained that PSM’s top management approached the finance ministry for immediate injection of Rs17 billion in the mill as per the financial package to revive the mill. The mill was in such a position that it has not been able to pay salaries to its employees for the last two and half months.
When contacted, PSM CEO Saadat Cheema confirmed that a request for injection of Rs17 billion worth of equity had been placed before the government to restore the supply chain. He said that it will improve the mill’s balance sheet.
He maintained that the Steel Mills was operating at 14%. “PSM may come out of losses if production levels touch 70%,” he said, and confirmed that the previous government had been providing commercial loans, but now the management requests equity injection.
The loans provided by the last government, which amounted to billion of rupees, had put additional burden on the sick unit, which was not even able now to pay salaries of employees.
According to officials, the board of directors of the Steel Mills was scheduled to meet today (Wednesday) to endorse the proposal of seeking the help of the government to inject Rs17 billion worth of equity, which will improve the company’s balance sheet and fetch a better price if the government wished to privatise it.
Officials maintained that the government had not responded so far. However, mill’s management hoped that the government will seriously consider to revive the sick unit as equity injections was a better option than giving out a loan – which adds a burden on the profit statement of the company in the shape of interest and principal payments.
The previous government had been giving commercial loans to the PSM in the name of bailout package, the officials said. The government provided Rs6.14 billion in 2009-10, where the bank deducted Rs3.5 billion as liabilities.
In 2010-11, PSM sought financial assistance of Rs25 billion, but a bailout package of Rs10.61 billion was approved.
The officials of the Ministry of Finance said that PSM’s management had also sought immediate release of Rs2.5 billion to pay salaries to its 16,000 employees who have not been paid for two months now.
“PSM management wants release of money to pay salaries to the employees before Eid so that they could celebrate Eid with their families,” official sources said. Adding further, the officials said that expansion plan of Steel Mill was (still) pending.
Published in The Express Tribune, July 31st, 2013.
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