ISLAMABAD, Aug 5: Russia has refused to provide technology and a soft-term credit for the expansion of Pakistan Steel unless Islamabad helps recover Moscow's $175 million from some private Pakistani companies.

Officials told Dawn here on Thursday that the management of Pakistan Steel had written a letter to the ministry of industries and production to take up the issue with the private companies that imported goods worth $175 million from Russia but never made the payment.

The Russian government, the officials said, had called upon the Pakistani authorities to recover the money from the defaulted, failing which it would be difficult for Moscow to consider the expansion of the mills from 1.1 million tons to 1.5 million tons.

The officials said that Russia was willing to offer $200 million soft-term credit for the expansion of the mills. But it maintained that under the Russian laws, no loan could be offered and no technical support could be given to a country that defaulted on any kind of payments.

Pakistan had earlier signed a memorandum of understanding (MoU) with Russia to expand Pakistan Steel from 1.1 million tons to 1.5 million tons. The issue was recently raised by Pakistan Steel chairman Lt-Gen (retd) Abdul Qayyum with the Russian ambassador who reportedly insisted that the Pakistan government would have to first get Moscow's $175 million defaulted payment recovered from the private companies to start any meaningful cooperation, specially over the mills' expansion programme.

When contacted Mr Qayyum confirmed to Dawn that the ministry of industries and production had been requested to help resolve the issue by forcing the private companies to pay the outstanding amount to Russia.

However, he said that Pakistan Steel had kept its options open to revamp and expand its production capacity through Russians, Chinese, Austrians or Ukrainians. "But we can undertake the expansion programme from our own resources as we have now with us $200 million," he said.

The PS chief said he was leaving for China on August 8 to negotiate with the Chinese authorities the expansion plan of the steel mills. He said that Chinese public sector organization - MCC Company - was ready to even take up the expansion of the mills from 1.1 million tons to 3 million tons.

Mr Qayyum said that Chinese technology was much more advanced and today China was producing 260 million tons of steel annually compared to 32 million tons of India and 1.1 million tons of Pakistan.

Nevertheless, he said China's loan was expensive and that he would ask the Chinese authorities to offer soft-term loan like the one it offered for the development of Gwadar Port ($200 million).

"But we are not in haste and will first want to have the report of our consultants - Corus Company of British - who are arriving in Pakistan in September," the PS chairman said.

"We are seeking a better financial package both from Russia and China to revamp and expand the mills," he said, adding in the light of the recommendations of the consultants, any decision on the issue would be taken.

Responding to a question, he said that $1 billion would be required to expand the mills from 1.1 million tons to 3 million tons. He did not rule out the possibility of mobilizing funds from the stock market to revamp and expand the mills by the management itself.

"At present we have Rs8 billion equity which could be further enhanced by borrowing from banks on low mark-up or through the stock market," the PS chairman said. Asked about forming a consortium to undertake the expansion programme, he said that this was also possible as Ukraine could provide Coke Oven batteries on behalf of Russia, while some of the technology could also be hired from Austria.