ISLAMABAD - Pakistan Steel Mills (PSM), which is largely considered a 'white elephant', has caused loss of Rs 2.76 billion to the national exchequer due to sale of various steel products below even actual cost.
PSM sold 182,616 million tons of various steel products to dealers during 2009-10 at a total price of Rs 9230.499 million which was below the actual cost of Rs11,995.002 million, thus causing a loss of Rs 2764.5 million to the national kitty, revealed Auditor General of Pakistan (AGP) audit report.
The AGP audit report 2011-12 observed that the sale price could not absorb even the direct cost/variable cost of the product and manufacturing cost of the products was not controlled to make the sales with a margin of profit for sustainability, which indicated weak planning and poor marketing strategy of the organization.
This matter was also taken up with the management through audit inspection report in April 2011. Whereas, the management in its reply dated May 5, 2011stated that the price fixation committee meets twice in a month or as and when required to review prices of Pakistan Steel products.
They in reply added that while reviewing the price of the products, the government's fiscal policies play an important role. Import of scrap is permissible at zero custom duty ,which is used in producing ingot/continuous cast billet, which are the main competitors of Pakistan Steel billet.
Ship plat from ship breaking industry also enjoys free tax remission.
Availability of the materials at much cheaper rate has adversely affected sale of cast/rolled billet even at its current price and sales have declined, the management in its reply added.
However, the reply was not tenable as scrap and ship wreckage cannot be compared with the prime products (billets/caste billets) of PSM. The management should have justified its stance on the basis of similar material available in the market in the similar period.
Audit also suggested review of the production cost and price mechanism to make the entity profitable.
The matter was discussed in DAC meeting held on December 23,2011. The DAC was not satisfied with the reply and directed the management to submit a revised reply stating all details of price fixation of products. However, the progress was awaited till the finalization of the report, said audit repot 2011-12.