Govt unlikely to provide funds to rescue PSM

[Naveed Yaseen]

IQBAL MIRZA
KARACHI (October 21 2009): The federal government is unlikely to pump in further funds to rescue Pakistan Steel Mills (PSM) from its present ailment. Dr Abdul Ghaffar Soomro, Secretary, Ministry of Industries and Production, during his visit to PSM here on October 17 is reported to have made it very clear to the management that the government, presently starved of resources, has already done more than its share for the ailing PSM by arranging a loan of Rs 10 billion during past three months to help in its recovery.

It is appalling, indeed, that the two most important positions of Director, Finance, and Director, Commercial, in the gigantic Pakistan Steel Mills are lying vacant, and nobody has bothered to fill in the positions by experienced competent persons, on regular basis, to pull the project out of its present mess.

Well-placed sources told Business Recorder here on Tuesday that the Federal Secretary, during the meetings, had cautioned the management to transform its present inefficient working into efficient zone and take care of a position which brings their case as sympathetic rated and not as mismanaged rated because it may not give the management access to any positive consideration by the government.

Dr Soomro had specially flown in here to assess the present situation confronted by the management after incurring an incredible loss of Rs 22 billion in financial year 2008-09. He asked the management to develop a business plan with the assistance of professionals so that its tenability is purchased by the decision making committees at the highest level so that they could come to the rescue of public sector organisations in situations as is being faced by PSM today.

Sources said that he explained that in case of professional failures, the government may not be able to give further money injections through arranging Government of Pakistan guarantees for more finances due to tight monitory policy run, based on deficit budgetary support waiting in line for aid and other external resources for the much desired improvement of the economy.

The Federal Secretary was briefed that the 50 percent capacity utilisation of PSM during last quarter was not creating sufficient funds to take it out of the gray. Reasons for the losses sustained include last year's price downturn up to half of the value in the international market affected the steel sale price reduction by Rs 30,000 - Rs 40,000.

Sources said that PSM management asked the Federal Secretary for more protective support against imports and against the proliferation of substandard steel sales which have a price differential of Rs 5,000 as minimal against PSM sales price.

It further informed Dr Soomro that non-registered and unscrupulous non-documented cheaper sales have put pressure on the sale price of PSM products. In this situation it is difficult for PSM, with full ownership of responsibility, to pay all the taxes to compete with the sale of substandard steel manufactured by rerolling mills and further fuelled by cheaper sales of non-tax entities.

PSM sells billets for downstream steel industry to manufacture quality reinforced bars and other structural requirements for construction industry which are as per standardised requirements against others with no follow-up of the standards. The management also complained that public sector supported programs also allow purchase of steel by contractors from substandard sources including non-manufacturers not certified by Pakistan Standards and Quality Control Authority (PSQCA) and non-documented tax entities.

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