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ISLAMABAD: The government agreed on Friday to provide an 'immediate relief' of Rs6 billion to Pakistan Steel Mills to avert its closure following a communication from the PSM management that it was starting a 'shutdown process' which would be completed by December 10.
According to informed sources, the chairman of the executive committee of the management said in a letter delivered to the ministry of industries and subsequently to the cabinet committee on restructuring that there was no option but to start the shutdown process because of shortage of raw material.
The process would be completed on December 10 after which, the letter said, it would be technically impossible to revive the plant.
A senior federal government official said the committee agreed to provide “an immediate relief” of Rs6 billion through a bank guarantee.
A meeting of the economic coordination committee (ECC) of the cabinet has been convened to formally approve the guarantee.
He played down a looming shutdown threat owing to raw material shortage and said the bank guarantee would help resume the process of opening of letters of credit for procuring raw materials (coal and iron ore) on an emergency basis.
Responding to a question about Rs20 billion bailout package sought by the PSM, the official said it had been considered by the CCOR, but a decision would require further talks over the next few days.
About the financial crisis that had blocked payment of salaries to over 16,000 staff, the official claimed that arrangements had been made to clear salaries within a few days.
In an earlier SOS message, the PSM management had informed the government that it was “finally left with no option but to submit before the government that immediate steps need to be taken for at least making out desperate efforts for revival of PSM by providing L/C (letter of credit) facility through the National Bank of Pakistan for procurement of raw material i.e. iron ore and coal for which NBP may be given instructions for arranging Rs6 billion LC facility to manage procurement of raw materials”.
The executive committee of the management which is looking after day-to-day affairs of the PSM in the absence of a managing director had warned that “if required action for procurement of raw material is not taken immediately, the mill might collapse and, thereafter, its revival would be difficult, even impossible”.
