The government provided Rs6.14b in 2009-10, Rs25 billion as financial assistance in 2010, but a bailout package of Rs10.61 billion was approved by the previous govt. PHOTO: FILE
ISLAMABAD:
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.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS (10)
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ
Why they have 16000 employee when it is running @ 14% capacity. Can't they do simple math to find ratio between manpower & production? At this rate they just need 1400 worker including management to do the job.
Lets ask the PM to give from his pocket this time.
Pakistans finances would have been better off if the Stelll Mill was being sold 8 years ago. Count the billions that were injected into this white elephant for the past eight years. But the "Good" judge had to intervene.....
They don't even feel ashamed of asking the government for free money year after year. Steel Mills, Railways, PIA all need to be shutdown.
The state shouldn't be manufacturing steel anyways, I'm sure the private sector is competent enough to take care of the steel industry.
The government should divert its energy toward developing the infrastructure for spurring other heavy manufacturing industries. The Steel industry just isn't "vital" enough for the state to be involved in it, let alone give freebie handouts worth PKR17b
Why can't PSM sell the same equity to a private investment company? ... Oh yes, I know why ... because they will come in and clean house, fire the management, improve the product and make PSM profitable again ... and that not what we want because then the tax-payer-sponsored welfare program will come to end.
Pakistan can't afford to give anybody "handouts" - especially industries that are chronic losers. Time for Pakistan to say "no" - worst case scenario you can import steel (like many others in the World) and redirect the fuel/energy used by the steel mills to keep the lights on.
Like at any other place, Steel Mills is one of the most corrupt organization in Pakistan.
It has been running for so long that by now it would have stand on its own feet, but that is far more than imagination, as corruption in every department of Steel Mills have become order of the day.
The management of Steel Mills did not found any other ground to ask more money from the government and now Eid has become an excuse for the Steel Mills management.
I have all the sympathies for the Steel Mills Employees, but how the management of Steel Mills will get rid of the corruption, it itself is a million dollars question.
"Shut the mill down". Its never going to work with GOS\GOP involvement. Give it to the Tata's or Mittal's and see how it blossoms. Its not in the Pakistani DNA to make public enterprises work.