The government has approved a bank guarantee of Rs6 billion for Pakistan Steel Mills (PSM) to ensure working capital of the company and directed the management to empower the Board of Directors of the Corporation.

Sources told Business Recorder that Cabinet Committee on Restructuring (CCOR) presided over by Finance Minister Dr Abdul Hafeez Sheikh was informed that the commercial banks were not ready to lend money to the PSM because of its financial condition. The PSM management sought help from the government in this regard.

An official said that the Finance Minster asked the management to take necessary steps to empower the Board of Directors in decision making for the better governance in the company.

At present, the Chairman of the company is more powerful than the Board in decision making. The minister also directed the PSM high ups to make the Business Plan more viable and bring it to the next meeting with more bifurcation and clarity.

The meeting also considered various recommendations for improvement in working of PSM and a comprehensive presentation based on 'Business Plan' was made to the CCOR. The meeting was informed that Pakistan Steel remained a profitable organisation from 2001 to 2008 and 2008-2009 was an unusual year due to many reasons mainly the global financial crisis.

It was told that the low capacity utilisation of about 34 percent was the major reason for the current crisis faced by PSM due to liquidity crunch, steep rises in international price of coal in 2008 and some governance issues.

The PSM management wanted an injection of Rs11 billion as well as substantial restructuring of existing loans, implementation of capacity enhancement plan and rationalisation of custom.

The CCOR also decided to work further on proposed business plan so that other context of PSM requirement could be fulfilled to ensure its long-term viability.

SOURCE: BUSINESS RECORDER