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The sources same, in Nov and Dec 2013, PSM Board of administrators (BoD) control six emergency conferences to counsel policy selections to the govt for resolution body, technical and monetary issues. It additionally administrated intensive consultations with steel market consultants. Not solely did this method reinforce the sooner analysis, it additionally known additional skeletons within the closet conjointly. the subsequent problems were known that require immediate attention.
Administrative issues: force is sixteen,000, that interprets into 275 workers per MT as critical regional benchmark of sixty seven workers per MT. Out of 4,882 officers, 2446 “officers” ar intermediate, matriculation or middle-pass. cost for employees is Rs fifty eight,566 whereas cost for officers is Rs eighty,943.
PSM features a sturdy and vocal CBA, supported by totally different political teams. Attrition of befittingly qualified individuals through retirement or otherwise, and appointment of individuals on favouritism has mostly left PSM with non-qualified and unproductive work force.
Technical and industrial issues: Current production capability is at one.36%, whereas plant of this size has to run at eightieth capability to be economically competitive. 30-year previous plant needs important rehabilitation prices to achieve eightieth capability. Maintenance is critically delinquent for thermal power station, turbo blower station, blast furnaces, SMD boilers/ converters and rolling mills.
Cost of conversion per MT is Rs four,000 as compared to the market average of Rs one,000 per MT. PSM is sort of out of the billet market and therefore the same may additionally happen with 60 minutes and metallic element merchandise. PSM’s aggressiveness and property is progressively turning into uncertain because of extortionately high mounted prices together with unproductive force.
Financial issues: accumulated liabilities stand at Rs 106 billion. Contingent liabilities ar over Rs eighteen billion. Loan defaults have occurred with all lenders and PSM seems as a defaulter in CIB. A default of Rs twelve billion with SSGC has place assured gas provide in danger. Current magnitude relation is zero.22, and current liabilities ar three.6 times current assets. Debt: Equity magnitude relation is minus zero, creating the capital structure unreasonable. PSM has no staple inventories, nor will it have any assets.
To date, political party has given Rs forty three.4 billion in little tranches as bailout packages since Gregorian calendar month 2009, that highlights the misconception of giving funds in little morsels. Ministry of Industries & Production has taken sure initiatives to ameliorate things. However, this can be a patchwork, not solutions.
Solution to issues besetting PSM would force hardcore choices. a number of these choices can entail prohibitory monetary value, others high political value. With this caveat, 5 policy selections ar submitted.
Option 1: standing quo: At this terribly moment, PSM doesn’t have staple or assets and will cause a forced closing in an exceedingly matter of weeks. The monthly prices calculable at Rs two.35 billion for following twelve months can add up to Rs twenty eight.8 billion, against that PSM might probably generate Rs two billion once a year from industrial exercise of barrier and coal conversion into coke on industrial basis. the current price of this regular payment for fifteen years at 12-tone system charge per unit is Rs 182.53 billion.
Expectations from GoP: ceaselessly support PSM’s monthly expenditure through quarterly payments. wherever will It Lead Us? all told chance, lenders can recall political party guarantees of Rs forty one billion. there’s a high chance of complete plant closing. PSM are going to be forced to incur final ending prices.
Option 2: ending – plus Sale: PSM ought to be instantly closed and its assets sold-out on as is wherever is basis. Expectations from GoP: Pay off Rs ninety one.202 billion against all liabilities when deduction of sale takings, that ar calculable to get Rs thirty three.39 billion. this selection can lead towards political value and review.
Option 3: conceive to revive with no call on privatisation: this selection is in consonance with anti-privatization sentiments. Expectations from GoP: a direct money injection of Rs nineteen.1 billion and non-cash facilities of Rs fifty one.774 billion. VSS Package for four,000 workers of Rs fourteen.17 billion.
Waiver of SSGC record surcharge of Rs half dozen.560 billion on principal of Rs twelve billion. Resolution of all tax and tariff connected problems particularly with relevancy sales and taxation exemptions on inputs.
Where will it lead us? this selection could cause a short lived revival. However, accumulated losses can still gather and by 2015, money deficits can appear. delay or moratorium of liabilities can come to haunt PSM once more, with continued insecure exposure to political party.
Option 4: Keep PSM ticking and denationalise inside twelve months: this selection suggests that PSM ought to be privatised in twelve months, and through this era, political party provides piecemeal money injection in line with the past follow. Expectations from GoP: Capital money injection in instalments Rs thirty one,610 million, monetary Restructuring through parking of loans Rs fifty,712 million, VSS Package for four,000 workers fourteen,167 million, release of SSGC surcharge half dozen,560 million.
Where will it lead us? – Incur any losses of over Rs twenty five billion in twelve months in 2014. Current ratios can deteriorate any. There are not any signs of a turnaround with any hurt on the far side 2014. A negative record can create it a troublesome group action to denationalise. within the event of a failure to denationalise, PSM and political party are going to be back to stand one.
Option 5: reconstitute, revive PSM and denationalise inside twelve months: this selection aims to use the time between currently and therefore the final part of privatisation to revive its activities. It additionally offers an opportunity to stay PSM publicly sector if restructuring is completed properly.