ISLAMABAD: A federal minister and management of Pakistan Steel have started exchanging blames and have made complaints to the prime minister as total liabilities of the mills cross Rs365 billion.

Informed sources told Dawn that some senior members of the Senate Standing Committee on Industries and Production who had met federal ministers for revival of gas to the steel mills later reported to the management that the federal ministers believed that the Pakistan Steel people “were not telling the truth.”

This prompted Maj-Gen (retd) Zaheer Ahmed Khan, the PSM chief, to write to the prime minister and “put on record what stood on ground to dispel any misunderstanding,” an informed official said.

This was followed by a letter by Minister for Privatisation Mohammad Zubair blaming the former general of disposing of huge inventories without federal government’s clearance.

The PSM chief in his communication to the prime minister said auditors were not completing audit of fiscal year 2014-15 of PSM as a going concern since the plant was not in operation for now about six months now due to gas reduction and lack of government support.

“This is going to fail government plans to privatise the mills as a going concern and nullify Rs18.5bn spent to revive it.”

He stated that the mills had attained 65 per cent capacity utilisation on March 2015 when gas stoppage reduced momentum and affected many plants and that he could not understand the designs behind gas cut as capacity utilisation had been increased from less than 10 per cent a few months earlier.

The PSM chief stated that the present supply of 3,600 cubic metres per hour at three kilogram per cubic metre was only sufficient to keep heated two coke-oven batteries, refractory kilns, hot blast stove whose refractory would collapse if gas was not supplied.

As regards two blast furnaces, he explained, they need normal gas pressure and flow since two boilers of power plant have to be operated to generate steam which then operate turbo-blower to provide high pressure air for blowing into 1,033 cubic meters volume blast furnace after being heated in hot-blast stoves which itself needs gas for heating. Also with it ‘oxygen’ is required for manual lancing to melt and cut cold material accumulated inside to bring blast furnaces into life.

“These two actions will hopefully take 60 days to revive the cold blast furnace while more delay will require major capital repair of blast furnace, mills closure and no production for two to three years.”

Based on these ground realities, Gen. Khan reported that a stock of Rs5bn (Rs3bn of steel slab and Rs2bn of ores) had to be brought into finished state for sale, after gas restoration. Therefore, it demanded restoration of gas pressure and provision of bare minimum funds (worth Rs8.5bn) for operations of the mills till June 2016 for which a separate summary was sent to the prime minister.

Mr Khan warned that unless this was done, the government on top of damage and plant closure will have to pay an additional Rs400 million along with Rs380m per month salaries since finished stock inventory has exhausted.

The mills would not be able to raise its own Rs400 million unless gas is restored and bare essential working capital requested in the summary is provided.

Minister of State and Chairman of Privatisation Commission on the other hand reported that mills had an inventory worth Rs9bn in March 2015 which has now reduced to Rs5bn and approximately Rs4bn has been spent on various miscellaneous expenses as reported by the mills.

“It is alarming to note that while the operation of the mills stand totally closed, an amount of (about) Rs500m is being spent on top of the Rs480m, which the federal government has been releasing as salaries for employees of the mills since the past six months,” the minister wrote.

He said the federal government was “seriously concerned over the disposal of this inventory worth Rs4bn without intimation. This is not acceptable.”

Mr Zubair also recommended with added emphasis that “in future, any sale/disposal” from the balance inventory worth Rs5bn be only done after prior approval of the Privatisation Commission.

He also desired that “a list of expenses which could be reduced or cut due to the closure of the mill be shared” with the Privatisation Commission.

The mills keeps adding Rs2bn per month in losses with zero production for almost nine months.

Published in Dawn, January 26th, 2015