Indian supplier claims Rs 27.8 billion dues on Pak Steel

[Naveed Yaseen]

IQBAL MIRZA
KARACHI (September 01 2009): An Indian supplier of iron ore has claimed payment of $33.5 million, equivalent to Rs 27.8 billion, from Pakistan Steel Mills (PSM) which he said he had paid as taxes and duties to Indian government on export of iron ore. A delegation of Indian supplier SASA, of Goa, is due to visit PSM on September 1 to meet the Chairman and Managing Director to have the payments released.

According to details available here, PSM had entered into a contract in 2003 with an Indian supplier for the import of five million tons of iron ore (fine and lumps) over a period of five years. The contract expired in 2008 with the supplier ending up in a dispute over the extra levy of taxes by Government of India during the tenure of the contract relating to the export of iron ore.

Although the terms of contract clearly specify that all taxes/duties in the supplier's country would be borne by him, yet he has taken the position that this was an unprecedented increase and PSM must bear this cost. A committee was constituted in 2007 by the then Chairman, Lieutenant General Javed, to negotiate with the supplier and, after extensive negotiations, a final agreement was drafted with both parties agreeing to share the taxes/duties paid by the suppliers. An almost $27.3 million was agreed to be paid by PSM.

The draft proposal was placed before the Board of Directors, and Lieutenant General Javed managed to have it passed, despite the fact that this was a clear breach of the contract. Subsequently, an agreement was signed between PSM and SASA, Goa, relating to the mode of payment.

The internal audit department of PSM had objected to this agreement as violation of contract and an extra burden on the almost bankrupt Paksteel. Needless to mention, PSM today is passing through a very murky financial period with no immediate recovery in sight.

New Chairman has just taken over and in the event he is forced to release the so-called payment of $27.3 million against unauthorised and non-contractual claims, the result could be disastrous, and the Prime Minister may again have to take an unprecedented action second time for the removal of the new management.

Pakistan Steel Mills, a gigantic national organisation, presently going through credibility crisis, having regularly bitten by the corruption bug, is in a state of somnolence following the unceremonious removal of its Chairman by the Prime Minister announced on the floor of National Assembly citing corruption and mismanagement in Pakistan's largest national asset.

According to well informed sources, the report relating to the enquiry conducted by FIA and a committee nominated by the Minister of Industries would soon be submitted to the Prime Minister, most probably advising to save this national asset from falling into wrong hands.

Highly placed business circles, who deal with PSM, believe that the step taken by the Prime Minister shall be lauded, and expressed the hope that corruption which has become order of the day in almost every state organisation and eating into the vitals of Pakistan's fledgling economy, shall be investigated and the culprits taken to task.

Removal of Moeen Aftab Sheikh, a retired bureaucrat, was a brave action but his replacement by another 74-year-old retired bureaucrat, M M Usmani, is questionable, they said. He has, no doubt, a very bright and clear past, but such a gigantic organisation requires an energetic and probably younger technocrat to face the severities of the international and local markets.

Usmani as head of PSM has challenging days ahead with little resources at his disposal but high hopes of turning an ailing organisation in red into green by the end of this year is asking for moon. In the face of financial crunch and global crisis the challenge seems to be Herculean. He would face his first test on September 1 when SASA, Goa, delegation would confront him on the payment of the amount which was agreed to earlier.

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