ISLAMABAD: The Pakistan Steel Mills is facing a severe financial crisis with its liabilities exceeding Rs110 billion and production dropping to 18 per cent of its capacity owing to shortage of raw material and running finances.
Informed sources told Dawn that the shortage of raw material had reached a point where the PSM might have to stop production soon.
The chairman of the Mills’ board of directors, Mr Fazlullah Qureshi, has requested the federal government for an emergency injection of Rs12 billion to stave off imminent closure of the country’s largest public sector industrial unit.
Officials said the PSM was in fact struggling to pay salary to its staff. After a lot of efforts, the company was able to start paying salary for the month of August on September 17. But all officers and many employees are yet to be paid.
When contacted, Mr Qureshi confirmed that he had written to the federal government some days back for Rs12 billion assistance.
He said the situation at the Pakistan Steel was almost the same as it was when he had sought the government’s help as it was operating at 25-30 per cent capacity utilisation and was running short of funds to procure raw material.
Mr Qureshi declined to discuss details of the PSM affairs, saying it was functioning like many other public sector corporations like Pakistan International Airlines and power sector.
During the eight-year period between 2000 and 2008, the PSM remained in profit and paid off all its previous debts, but since then it has been incurring losses.
The sources said that the PSM, which had attained 88-90 per cent capacity utilisation in 2007-8 and 2008-09, had been on a slide for two years and reached a 25 per cent capacity utilisation in July this year. It plummeted further to 18 per cent in first 15 days of the current month. The company which has a capacity to produce about 3,000 tons of various products is now producing only 450-500 tons.
Its sales’ revenue which had been hovering around Rs5 billion a month in 2007-8 dropped to Rs2.5 billion in July this year, Rs1.3 billion in August and Rs750 million by Sept 15, mainly because of shortage of raw material which includes iron ore and coal.
On top of that almost the entire management cadre, including the chief executive officer, are working as acting in charge.
Besides, the PSM’s immediate liability stands at Rs60 billion and its financial losses have exceeded Rs50 billion – taking the total payables to a whopping Rs110 billion as of Sept 15.
The raw material — mainly coal required to keep its batteries in operation — has reached a stage where the running cycle of coke batteries has been enhanced to 28 hours and then to 40 hours, instead of 16 hours to avoid closure. But, insiders said, extending the running cycle to such a high level was playing havoc with plants. This is despite the fact that a $30 million (Rs2.5 billion) amount has been spent on revamping the batteries over the last three years, without an investigation into the outcome of the revamped plan.
“This is criminal negligence,” said an officer concerned of the PSM who said even the board of directors reconstituted almost one and half a years ago had failed to give clear policy guidelines to save the deteriorating organisation.
He said the Steel Mills did not get electricity from the national grid owing to financial problems and it had to operate on internal turbo thermal generators that had the power generating capacity of 165MW. And most of these generators had also gone out of order. With a capacity of 165MW, the turbo generators are producing only 20MW for lack of proper repairs and maintenance.
Since September 6, this year, the rolling mills of the PSM are closed and iron making plants (IMPs) and steel-making plants (SMPs) are functioning at 18 per cent of their capacity.
When the Supreme Court of Pakistan took a suo motu notice of the corruption and mismanagement in the PSM in Sept 2010, the sources said, its total losses stood at Rs22 billion which had now increased to Rs110 billion, but the government was yet to submit a report to the court about the losses.
Under the court’s directive, the government was required to fix responsibility for PSM’s losses and submit a report to the court by June 6 this year.
An initial report was submitted to the ministry of industries and production in July, but it was disputed by the PSM officials who said the probe had exceeded its terms of reference.
The report has since been forwarded to the federal investigation agency, but without any tangible progress.