KARACHI, July 1: Pakistan Steel on Tuesday cleared its entire balance principal amount by paying Rs10.4 billion to the consortium of five banks.

Industries and Production Minister Liaquat Ali Khan Jatoi handed over the cheque to Habib Bank Limited president Zakir Mehmood, who heads the consortium of banks.

Giving a background as to how PS paid the loan nine years ahead of the schedule, Pakistan Steel chairman Muhammad Afzal Khan told a press conference that the PS had inherited a huge loan of Rs19.117 billion on June 30, 1999, on the government’s decision on final restructuring and reforms from May 2000. The loan comprised principal amount of Rs11.35 billion and interest of Rs7.767 billion accumulated during previous two decades.

The government, he said, had decided that PS would pay back the principal amount of Rs11.35 billion in 12 equal yearly instalments along with mark-up, while the accumulated interest of Rs7.767 billion would be paid in seven instalments after the principal amount was fully repaid.

Afzal Khan said PS started paying the instalments regularly, and by June 30, 2002, an amount of Rs4.671 billion had been paid to the banks. In 2002-2003, Pakistan Steel found itself in a comfortable position due to unprecedented sales of around Rs22.8 billion coupled with 100 per cent increase in productivity. Instead of paying one instalment only, PS cleared Rs10.41 billion principal amount, including Rs951 million mark-up.

On manpower structuring, he said the Pakistan Steel off-loaded regular manpower to 14,750 from 23,515 persons under a voluntary retirement facility, which was totally funded by internal resources. An amount of more than Rs4.38 billion had been paid to the retired employees.

In 2002-2003, Pakistan Steel maintained its production level at 91 per cent of the capacity to achieve higher sales of Rs22.8 billion. Quantity wise sales touched to 1.3 million tons in 2002-03 as compared to 1.1 million tons in the last fiscal. Pakistan Steel had contributed so far more than Rs46 billion to the exchequer in shape of duties and taxes. In addition, foreign exchange saving was estimated at $3.9 billion in terms of import substitution.

About expansion plan in collaboration with Russia, he said in the first phase production capacity would be enhanced to 1.5 million tons per annum from the current 1.1 million tons. The work has already been started and expected to be completed by December 2005.

He said China had shown its interest in the expansion up to three million tons under phase II scheme and it would be completed hopefully by the end of 2007.

Liaquat Ali Jatoi said it was a good sign that public sector organizations were returning to profits and Pakistan Steel, by clearing outstanding liabilities and loans, had set an example for other organisations.

He said Prime Minister Mir Zafarullah Khan Jamali would visit Pakistan Steel on Wednesday to review the performance of PS.

He said public sector organizations were now showing profits. He added that National Fertilizer Corporation had shown a profit of Rs1 billion and Thatta Cement was also making profits.

He said the economy was now showing some positive indicators as 39 items of industrial sector has shown 11.8 per cent growth.

Meanwhile, a seven-member Russian delegation of Consortium Intermach headed by chairman Semenov Alexi arrived on July 1 to continue elaboration of technical and economic options of Pakistan Steel expansion. The Consortium is one of the contending companies for participation in the project of PS expansion up to 1.5 million tons (phase I) and up to three million tons (phase II).

The delegation met the industries minister at the PIDC House on Tuesday. Earlier, two teams from Russia arrived in April and June 2003. In the first visit, technical experts of the consortium in collaboration with PS collected and summarized vast technical information. Intermach presented the technical report to the government and the Pakistan Steel chief on May 23. The finalized report was submitted to Pakistan Steel on June 2 being the part of basic design solutions (BDS).