Auditor’s remark: Snags may hold up PSM privatisation plans

Auditor says not in a position to give any opinion on account of the corporation.

ISLAMABAD:

Plans to sell off Pakistan Steel Mills may run into a snag as the auditor intends to issue a disclaimer on the ‘going concern’ issue of the sick unit, which is running at a low capacity due to non-availability of raw material.

“If the auditor uses such a report, emphasising that they are not in a position to give any opinion on the account of the corporation, then its privatisation may be adversely affected,” the Economic Coordination Committee (ECC) observed in its April 25 meeting, whose minutes are available with The Express Tribune.

According to the document, the economic decision making body was briefed that the audit for the year ending June 30,2013 had not been finalised so far as the auditor intended to issue a disclaimer on the ‘going concern’ issue.

The document said the industries and production ministry informed the cabinet body that in the current situation, the possibility of finding a strategic partner for Steel Mills looked remote.

“One urgently needs to focus on its restructuring without which the PSM will no longer be operative in the short term,” the ministry said.

It revealed that it had submitted a summary before the ECC in its meeting held on August 26, 2013 for providing financial assistance worth Rs28.49 billion to the PSM in one go.

“However, the ECC advised to present a revised plan and finance ministry and industries and production ministry drafted an interim relief package amounting to Rs3.327 billion.

“In September 2013, the government released Rs2.9 billion, which met the needs of the PSM only till mid-October 2013,” the ministry said.

It said if the government decided to offer the PSM’s share for public issue, then the appointment of financial adviser would take six months and the entire process could not be completed before June 2015.

It proposed that the government might agree to implement the first six months restructuring plan until a financial adviser was appointed for the public issue.

The document said the ECC, after detailed discussion, agreed to the ministry’s recommendation and approved a cash injection of Rs18.5 billion into the PSM.

According to the plan, Rs12.5 billion and Rs3 billion will be injected as the first and second tranche. Following appointment of a financial adviser, a third tranche of Rs3 billion will be issued for achieving 77% capacity and to turn around the PSM as a profitable entity.

The ministry said that by approving a six month plan, the PSM will achieve 60% capacity by November 2014 and sale collection per month will be enhanced from Rs600 million to Rs4,485 million per month while loss per month shall be reduced from Rs1800 million to Rs500million.

Published in The Express Tribune, May 13^th, 2014.