The breakdown of the PSM has put questions over the policy of injecting more and more funds into the moribund unit. However, despite the increasing disquiet over the state-owned entity, the Economic Coordination Committee (ECC) of the Cabinet on Thursday approved another Rs1 billion for paying two-month salaries to PSM employees.
“The relevant ministry and the PSM should find a way out of the current stalemate as the government just cannot afford to continue providing finances to meet the liabilities of PSM,” said Finance Minister Ishaq Dar while chairing the ECC meeting.
The PML-N government had approved a Rs18.5 billion-bailout package in April last year, which it augmented further by Rs2.5 billion to pay salaries of the employees. The PC and the PSM management had claimed that the Rs18.5 billion cash injection would help achieve 77% capacity utilisation by January 2015 – a target that was never achieved.
In June this year, PC had sought additional Rs6.4 billion to achieve the missed milestones.
While citing various factors affecting the PSM output, additional secretary in-charge of Privatisation Division, Ahmad Nawaz Sukhera, wrote to the ECC that the PSM “capacity utilisation dropped to almost zero (1%) by the end of August 2015”.
The admission came just days before Privatisation Commission Chairman Mohammad Zubair is set to leave for China on a road show to convince Chinese investors to buy PSM.
The PC has cited several reasons behind the zero capacity utilisation of the plant; these include delay in the release of funds by the Finance Ministry, tripping of water pumping stations, force majeure of blast furnace, reduction in gas pressures and obsolete machinery.
The PSM has also claimed that it is unable to match the prices of its finished products with similar cheap imported products from China.
For payment of June-August salaries to the employees of Pakistan Machine Tool Factory, the ECC also approved Rs96 million cash injection.
The ECC also withdrew its earlier decision of January 2013 in a case of changes in the composition of business express train, saving Pakistan Railways from Rs815 million losses. The recall of the January 2013 decision, which was not formally implemented, would help the judicial settlement of the matter, according to the Finance Ministry.
In March 2011, Pakistan Railways had awarded the contract to Four Brothers International at 88% occupancy rate subject to an investment of Rs225.8 million. The contractor was supposed to pay Rs3.2 million in advance for a round-trip, which the contractor never paid in advance.
The Business Express had been inaugurated by the then Prime Minister in February 2012. In January 2013, the ECC had approved to modify the original agreement besides changing the train composition. It had reduced minimum occupancy to be achieved at 65% from 88%.
According to the original agreement, the outstanding dues against the private contractors stood at Rs1.35 billion as of August 17, 2015. Had the ECC endorsed the 2013 decision, arrears against the contractors would have come down to Rs520 million, resulting into loss of Rs815 million.
