Pakistan Steel Mills: Hinting at cutoff, ECC approves another Rs1 billion
Meeting discusses issues behind industrial unit’s failure, wants way out of stalemate
PHOTO: AFP
ISLAMABAD:
Despite injecting Rs21 billion in Pakistan Steel Mills under the name of enhancing capacity utilisation, the Privatisation Commission admitted on Thursday that the country’s largest industrial unit was virtually non-functional last month.
The breakdown of the PSM has put questions over the policy of injecting more funds into the ailing unit. However, despite the increasing disquiet over the state-owned entity, the Economic Coordination Committee (ECC) of the Cabinet on Thursday approved another Rs1 billion for paying two-month salaries to PSM employees.
“The relevant ministry and the PSM should find a way out of the current stalemate as the government just cannot afford to continue providing finances to meet the liabilities of PSM,” said Finance Minister Ishaq Dar while chairing the ECC meeting.
Read: Pakistan Steel Mills: Sindh CM wants SSGC to resume gas supply
The PML-N government had approved a Rs18.5 billion-bailout package in April last year, which it augmented further by Rs2.5 billion to pay salaries of the employees. The PC and the PSM management had claimed that the Rs18.5 billion cash injection would help achieve 77% capacity utilisation by January 2015 - a target that was never achieved.
In June this year, PC had sought additional Rs6.4 billion to achieve the missed milestones.
While citing various factors affecting the PSM output, additional secretary in-charge of Privatisation Division, Ahmad Nawaz Sukhera, wrote to the ECC that the PSM “capacity utilisation dropped to almost zero (1%) by the end of August 2015”.
The admission came just days before Privatisation Commission Chairman Mohammad Zubair is set to leave for China on a road show to convince Chinese investors to buy PSM.
The PC has cited several reasons behind the zero capacity utilisation of the plant; these include delay in the release of funds by the Finance Ministry, tripping of water pumping stations, force majeure of blast furnace, reduction in gas pressures and obsolete machinery.
The PSM has also claimed that it is unable to match the prices of its finished products with similar cheap imported products from China.
For payment of June-August salaries to the employees of Pakistan Machine Tool Factory, the ECC also approved Rs96 million cash injection.
Read: ECC allows import of 150,000 tons of urea
Business train
The ECC also withdrew its earlier decision of January 2013 in a case of changes in the composition of business express train, saving Pakistan Railways from Rs815 million losses. The recall of the January 2013 decision, which was not formally implemented, would help the judicial settlement of the matter, according to the Finance Ministry.
In March 2011, Pakistan Railways had awarded the contract to Four Brothers International at 88% occupancy rate subject to an investment of Rs225.8 million. The contractor was supposed to pay Rs3.2 million in advance for a round-trip, which the contractor never paid in advance.
The Business Express had been inaugurated by the then Prime Minister in February 2012. In January 2013, the ECC had approved to modify the original agreement besides changing the train composition. It had reduced minimum occupancy to be achieved at 65% from 88%.
According to the original agreement, the outstanding dues against the private contractors stood at Rs1.35 billion as of August 17, 2015. Had the ECC endorsed the 2013 decision, arrears against the contractors would have come down to Rs520 million, resulting into loss of Rs815 million.
Import of pulses
The ECC allowed import of 50,000 tons of gram pulse aimed at controlling the price of the commodity in the local market. The Ministry of National Food Security and Research had proposed import of 100,000 metric tons of the commodity.
The average per kilogramme price of the gram pulse increased to Rs113 last month from Rs77 per kg recorded in April this year. The Ministry of National Food Security and Research has attributed the increase in prices to lower production and hoarding. It said the shortage was not alarming but it appeared that market forces were taking unfair advantage of the situation.
The total production of gram pulse remained at 483,800 metric tons in the last fiscal year 2014-15, which was 21% higher than the previous year. Despite the increase in production, the prices have surged by almost 50% in the last four months.
Published in The Express Tribune, September 18th, 2015.
Despite injecting Rs21 billion in Pakistan Steel Mills under the name of enhancing capacity utilisation, the Privatisation Commission admitted on Thursday that the country’s largest industrial unit was virtually non-functional last month.
The breakdown of the PSM has put questions over the policy of injecting more funds into the ailing unit. However, despite the increasing disquiet over the state-owned entity, the Economic Coordination Committee (ECC) of the Cabinet on Thursday approved another Rs1 billion for paying two-month salaries to PSM employees.
“The relevant ministry and the PSM should find a way out of the current stalemate as the government just cannot afford to continue providing finances to meet the liabilities of PSM,” said Finance Minister Ishaq Dar while chairing the ECC meeting.
Read: Pakistan Steel Mills: Sindh CM wants SSGC to resume gas supply
The PML-N government had approved a Rs18.5 billion-bailout package in April last year, which it augmented further by Rs2.5 billion to pay salaries of the employees. The PC and the PSM management had claimed that the Rs18.5 billion cash injection would help achieve 77% capacity utilisation by January 2015 - a target that was never achieved.
In June this year, PC had sought additional Rs6.4 billion to achieve the missed milestones.
While citing various factors affecting the PSM output, additional secretary in-charge of Privatisation Division, Ahmad Nawaz Sukhera, wrote to the ECC that the PSM “capacity utilisation dropped to almost zero (1%) by the end of August 2015”.
The admission came just days before Privatisation Commission Chairman Mohammad Zubair is set to leave for China on a road show to convince Chinese investors to buy PSM.
The PC has cited several reasons behind the zero capacity utilisation of the plant; these include delay in the release of funds by the Finance Ministry, tripping of water pumping stations, force majeure of blast furnace, reduction in gas pressures and obsolete machinery.
The PSM has also claimed that it is unable to match the prices of its finished products with similar cheap imported products from China.
For payment of June-August salaries to the employees of Pakistan Machine Tool Factory, the ECC also approved Rs96 million cash injection.
Read: ECC allows import of 150,000 tons of urea
Business train
The ECC also withdrew its earlier decision of January 2013 in a case of changes in the composition of business express train, saving Pakistan Railways from Rs815 million losses. The recall of the January 2013 decision, which was not formally implemented, would help the judicial settlement of the matter, according to the Finance Ministry.
In March 2011, Pakistan Railways had awarded the contract to Four Brothers International at 88% occupancy rate subject to an investment of Rs225.8 million. The contractor was supposed to pay Rs3.2 million in advance for a round-trip, which the contractor never paid in advance.
The Business Express had been inaugurated by the then Prime Minister in February 2012. In January 2013, the ECC had approved to modify the original agreement besides changing the train composition. It had reduced minimum occupancy to be achieved at 65% from 88%.
According to the original agreement, the outstanding dues against the private contractors stood at Rs1.35 billion as of August 17, 2015. Had the ECC endorsed the 2013 decision, arrears against the contractors would have come down to Rs520 million, resulting into loss of Rs815 million.
Import of pulses
The ECC allowed import of 50,000 tons of gram pulse aimed at controlling the price of the commodity in the local market. The Ministry of National Food Security and Research had proposed import of 100,000 metric tons of the commodity.
The average per kilogramme price of the gram pulse increased to Rs113 last month from Rs77 per kg recorded in April this year. The Ministry of National Food Security and Research has attributed the increase in prices to lower production and hoarding. It said the shortage was not alarming but it appeared that market forces were taking unfair advantage of the situation.
The total production of gram pulse remained at 483,800 metric tons in the last fiscal year 2014-15, which was 21% higher than the previous year. Despite the increase in production, the prices have surged by almost 50% in the last four months.
Published in The Express Tribune, September 18th, 2015.