Rs11bln State Bank loan sought to clear PSM’s liabilities

KARACHI: The finance ministry has sought release of more than Rs11 billion as a loan from the central bank to the loss-making Pakistan Steel Mills (PSM) to pay off dues of retired employees, it was learnt on Friday.

The finance division, in a letter, requested the Accountant General of Pakistan to authorise the State Bank of Pakistan to credit the amount of Rs11.4 billion to the PSM’s bank account in the National Bank of Pakistan.

The loan will be used to settle the remaining 90 percent dues to the litigant retired employees of the PSM in compliance of Economic Coordination Committee (ECC) of the cabinet decision, according the letter available with The News.

In April, the ECC approved release as government loan of Rs1.30 billion in the last fiscal year and Rs3.85 billion per annum during the next three years for settlement of the outstanding liabilities of litigants in the case involving PSM.

“The loan will be recoverable in 20 years along with interest with a grace period of five years for recovery of principal amount,” said the letter. “The interest will be chargeable at the prevailing rate for the respective year.”

The government is weighing an option to rejuvenate the state-owned PSM under the public-private partnership mode in phases that was estimated to cost around $800 million. The plant would be revived to achieve its built-in capacity in the first phase within one and a half-year, while the production capacity would be jacked up to three million tons in the second phase.

The PSM shut down its furnaces in 2015 and it consumed almost Rs200 billion of state funds on various heads till last year from 2008 when it used to be a profitable organisation. The government has to pump an estimated Rs400 million every year to pay salaries of the PSM’s employees.

Chinese steelmaker MCC International has already expressed its interest in reviving the PSM. The finance ministry said the Chinese delegation showed interest to invest in the steel industry with demand of nine million tons, which is increasing by 15 percent every year.

In June, the ECC approved a rationalisation plan for PSM to lay off more than 9,000 employees.

The ECC approved a “full and final” human resource rationalisation plan for the PSM’s employees in accordance with the judgment and observations of the Supreme Court of Pakistan and other courts hearing the cases involving the PSM.