Pak Steel expansion plan put on hold

Pak Steel expansion plan put on hold
Thursday, 15 October 2009 08:42
Highlights - Business News
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ISLAMABAD: The government has shelved a $2.2 billion expansion plan of Pakistan Steel Mills Corporation because of financial problems faced by the mill, The News has learnt through reliable sources. A senior official of the Ministry of Industries and Production confirmed to The News that the expansion project of the mill had been put on hold because of financial constraints. This is not an ideal time for the revival of this giant public institution, the official said asking not to be named. The project of Pak Steel expansion was conceived by the mill s top management and was not brought to the notice of the ministry, the official said. Under the expansion project, the production capacity of the mill might have risen from 1.1 to 5 million tons a year. Moeen Aftab, ex-chairman of Pak Steel, who was sacked by Prime Minister Yousuf Raza Gilani after losses mounted to around Rs20 billion, had visited China along with a private steel mill owner to negotiate a multi-billion-rupee deal with China Metallurgical Group Corp (MCC), said an insider of the mill. A preliminary report prepared by the mill for the expansion project, which is available with The News, described the definition, cooperation mode, financing, feasibility report, responsibilities and timetable for both parties to the project.

The report said Pak Steel and MCC would sign an MoU draft and constitute project team and designate contact person and person in charge before March 15, 2009 and arrange down payment of 20-30 per cent and letter of intent of credit guarantee from the ministry of finance. After one month of the signing of the MoU, the report said, a feasibility study agreement for capacity expansion of Pak Steel to five million tons a year would be carried out and after three months of the feasibility study, both the sides would obtain all necessary approvals from competent authorities. Within one month of the submission of the feasibility study by MCC, it said, the study would be approved and after two months, an engineering, procurement and construction (EPC) contract would be signed. The report said the project would be completed in four to five years after signing of the EPC contract. In May 2006, the Supreme Court had stopped the privatisation of Pakistan Steel Mills. Although it remained on the privatisation list, successive governments repeatedly stressed that this strategic asset would not be sold in haste. The Supreme Court has now taken suo motu notice of corruption involving Rs22 billion in the steel mill and the case is pending before the court.


Courtesy: The News