ISLAMABAD, July 6: The Privatization Commission has decided to appoint a consortium of three companies to act as financial adviser for the privatization of Pakistan Steel by December 31, 2005.

Informed sources told Dawn here on Wednesday that the consortium of Citibank Corporation, Chorus Company of England and M/s Furgoson had been asked to shortly finalize the feasibility study for the privatization of Pakistan Steel.

A number of expressions of interest (EoIs) were received by the Privatization Commission for the advisory services and early restructuring of the steel mills.

The sources said that Prime Minister Shaukat Aziz had directed the Privatization Commission to “quicken the task” so that PS was disinvested positively by December 31, with a view to avoiding its losses. The PC authorities have given a commitment to the prime minister to carry out the job within the prescribed timeframe.

Pakistan Steel Chairman Lt-Gen (retd) Abdul Qayyum when contacted said that he had requested the president and the prime minister that if at all PS was to be privatized it must be privatized before the end of this year so that the future buyer should pump funds into it for increasing its production capacity from 1.1 million tons to 1.5 million tons and eventually to three million tons as per the designed capacity. “The government wants to leave the revamping task of the mills to the future investor,” he added.

However, the PS chairman said that some of the immediate repair and minor balancing, modernization and replacement (BMR) would be done by the mills’ authorities to ensure that there was no major breakdown.

For example, Mr Qayyum pointed out, there were two coke oven batteries that needed urgent repair and minor BMR. One of the batteries, he said, had been planned to be repaired at a cost of $8-10 million. It costs $40 million to import a new battery.

“On July 20, the tenders will be opened for the repair of one of the coke oven batteries,” the PS chairman said, adding that the mills would recover the amount within four months. He said one of the major issues was the maintenance of the mills which was currently being done successfully despite various problems.

Mr Qayyum said that there was a record sale and profit earned by the mills in the history of Pakistan during 2004-05. “Our sales stood at Rs32 billion, while after tax profit was Rs6 billion, as against Rs26.7 billion of sale and Rs4.7 billion of profit last year,” he added.

The PS chairman, who earlier earned laurels to turn around Pakistan Ordinance Factories, Wah, said that Rs9 billion accumulative losses of the mills had also been removed. “We have then cleared a Rs2.5 billion loan taken for bridge financing.”

Nevertheless, he said that some of the plants of the mills were beyond local repair and warranted immediate BMR. Pakistan Steel, which had given the highest production, was now fast becoming outdated and needed new technology, he added.

“That was why a decision has been taken to disinvest the mills as early as possible and that let the new investor make investment in it immediately,” Mr Qayyum added.

In reply to a query, the PS chief said that demand for steel was declining due to its increased supply in the international market.