Privatisation of PSM facing unprecedented delays

The privatisation of Pakistan Steel Mills Corporation (PSMC) has been hampered due to many unprecedented issues related to the unpaid receivable by the company. Currently the main hindrance is the Sui Southern Gas Company Limited (SSGCL) which has refused to issue the relevant No Objection Certificate (NOC) for PSMC.

According to sources SSGCL had been requested to remove claim on 1229 acres of Steel Corp land only and shift the claim to remaining 18000 acres to recover outstanding receivables. But the gas utility is refusing to issue the NOC for 1229 acres of land against its claims of pending receivables.

Finance division had proposed the following conditions for repayment in a letter written to SSGCL (i) PSM to repay principal amount of duly reconciled outstanding amount between PSM and the SSGC in annual installments within a period of 10 years, starting after one year from the date of privatization; and (ii) Late Payment Surcharge (LPS) against the principal amount will be determined in accordance with the opinion of Law Division on the issue solicited by the Petroleum Division and Finance Division which shall extend all necessary support from an agreed settlement plan of the LPS among the PSM and the SSGC.”

However, SSGC, in a letter of February 14, 2022 sent the following response: (i) SSGC will appreciate if Finance Division endorses/assures judicious settlement of SSGC outstanding receivables against PSMC as ‘Guarantor’; (ii) moreover, draft LoC shared by Ministry of Finance, the contingency plan must be included in case of non-payment by PSMC. MoF may include the option of transfer of PSMC land in favour of SSGC if the agreed payment plan is not rigorously followed by PSMC; and (iii) Comfort Letter must include payment plan of LPS either on the same terms mentioned in the LoC regarding principal payment or the amount of LPS can be adjusted against PSMC land which could be transferred to SSGC without any encumbrances. As per our understanding the ascertainment of LPS amount will however be based upon and subsequent to the opinion of the Law Division regarding applicable rate of LPS.