ECC approves 6-month pay for non-functional PSM workers

ISLAMABAD: The Economic Coordination Committee of the Cabinet (ECC) Tuesday approved the release of six-month salary for the employees of dysfunctional Pakistan Steel Mills (PSM).

The ECC approved the release of salary while deferring a summary for conversion from London Interbank Offered Rates (LIBOR) to Secured over Night Financing Rate (SOFR) without conducting a cost-benefit analysis on foreign loans and contracts.

The committee was informed that the mills was on its way to closure, as 5,000 employees were retrenched while the remaining 3,000 existed on the payroll.

The Ministry of Industries has approached the competent court to offer a voluntary separation scheme for the remaining 50 percent of employees, and it is expected that they will be retrenched. However, the sources said the PSM was closed in June 2015 and the government had been doling out salaries since then but did not invoke Chapter 11 of insolvency of the PSM. Now the time has come when the PSM-related decision should be made on merit instead of protecting political and vested interests, said the official sources.

On the issue of transition from LIBOR to SOFR, the official said the LIBOR got scrapped which was forward looking but now SOFR was going to be introduced on the basis of US treasury rates; however, the adoption of SOFR required compensation for those loan contracts which were signed in the past.

There is a difference between LIBOR and SOFR as LIBOR is determined on future prospects and SOFR on the basis of actual rates. But the question arises that how compensation for the past contracts would be finalized as international association suggested compensation rate of 42 basis points, 26 basis points and 12 basis points for one year, six months and three months.

An official announcement made after the ECC meeting said Caretaker Federal Minister for Finance Dr Shamshad Akhtar chaired the committee meeting on Tuesday.

The Ministry of Planning, Development, and Special Initiatives gave a briefing about the trends of major economic indicators and trends in the prices of important food items.

The ECC directed the Ministry of National Food Security and Research to prepare and submit regular reports on availability of stocks, consumption and pricing of all staple items, especially wheat and sugar, to the ECC in order to enable it to monitor the availability and pricing of these important commodities.

The ECC also directed the Ministry of Planning, Development, & Special Initiatives to ensure control on undue profiteering and to maintain the gap between wholesale and retail prices of essential food items and consumer products through respective chief secretaries.

The ECC considered a summary of the Ministry of Industries & Production regarding “Approval for Disbursement of Salary of Pakistan Steel Mill (PSM) Employees for the Financial Year 2023-24”.

After a detailed discussion and deliberation, the ECC authorized the Finance Division to approve payment of projected net salary for first six months of the Financial Year 2023-24 to be disbursed according to the salary demand of PSM for every month from already approved budgetary allocation of Rs10 billion.

A summary of the Ministry of Energy was also considered regarding transition of London Inter Bank Offer Rate (LIBOR) to Secured over Night Financing Rate (SOFR).

The ECC, after discussion, directed the Ministry of Energy to prepare a detailed analysis of the financial implications of this decision and bring it in the next meeting for discussion and approval.