ISLAMABAD, Feb 1: The government has approved a major $2 billion expansion programme for the Pakistan Steel Mills to utilise its full production capacity.

Official sources told Dawn that the expansion of the mills would be carried out under a new balancing, modernization, replacement and expansion (BMRE) programme. Under the programme, manpower of the mills would also be doubled.

The sources said that President Gen Pervez Musharraf was given a detailed briefing on Friday by Prime Minister’s Adviser on Finance and senior officials of the Ministry of Industries and Production about the expansion plan of the mills.

The president, who was leaving for Moscow on Sunday on a five-day visit to Russia, sources said, approved the expansion plan to enhance the mill’s production capacity from 1.5 million tons to three million tons.

Similarly, the existing manpower of 13,000 people will also be increased to roughly 26,000 by achieving 100 per cent production capacity of the mills.

The sources said during the president’s visit a Memorandum of Understanding (MoU) would be signed for the expansion of the mills. Efforts would also be made to get $95 million Russian soft loan for undertaking the expansion programme.

The government, the sources said, intended to seek the expansion programme of mills on barter basis to avoid spending precious foreign exchange on the project.

“Although we are in a position to spend considerable funds on mills’ expansion, efforts would be made to finalize the deal on a barter basis,” said a source privy to the meeting presided over by the President Gen Pervez Musharraf on Friday.

He said that some of the abandoned Russian machinery and other unutilised equipment would be sought on concessional price for expanding the existing production capacity of the mills.

Pakistan Steel Mills started operating in 1975 at a cost of Rs25 billion against its original cost of Rs15 billion. It started producing pig iron in 1981.

However, the mills still has Rs16 billion liability of commercial banks, although the present management had repaid Rs14.5 billion to the banks.

The sources said that the president had been informed that both the PPP and PML-N governments were responsible for bringing colossal financial losses to the mills.

“When Nawaz Sharif was in power Special Statutory Regulatory Orders (SROs) were introduced to allow import of cheap iron while during Ms Benazir Bhutto’s government suppliers and dealers were allowed to get iron and other materials from the mills on reduced rates,” a source said.

The sources said that the president was also informed that losses worth Rs12 billion had not been reflected in the books of the mills and that the National Accountability Bureau (NAB) did not do anything to recover the money from those who were involved in corruption.

The annual consumption of steel and iron in the country is six million tons. Pakistan Steel Mills is currently producing 1.5 million tons and about one million tons iron and steel is being produced at Gadani, by ship breakers while the rest is imported by paying precious foreign exchange.