BR reported that the government is likely to give 2 year extension to running finance facility of PKR 2 billion to cash starved Pakistan Steel Mills up to January 4th 2012.

Sources in Ministry of Production said that in view of severe financial crunch faced by PSM during 2008 to 2009, the Finance Ministry had approved term loan facility of PKR 8 billion and running facility of PKR 2 billion for 1 year on rollover basis.

The Economic Coordination Committee of the Cabinet had also cleared the Finance Ministry's back proposal. The sources said guarantee for running finance facility was valid up to January 5th 2011 to be renewed on yearly basis as per Finance Division' Office Memorandum of June 5th 2009.

The matter for renewal of running finance facility was taken up with Finance Division which advised that under Debt Limitation Act, 2005, the renewal of the existing guarantee is considered as issuing new guarantee hence extending and rolling out the guarantee requires prior approval of the GoP. According to sources, PKR 2 billion in the shape of running finance facility was fully availed for payment of L/C document relating to procurement of iron ore.

Moreover, as per advice of National Bank of Pakistan, Pakistan Steel's sales collection is also being deposited in said running finance account which is used for recurring operational expenses of the mill. However, loan of PKR 2 billion is outstanding under the facility which is to be continued on yearly rollover basis for which the GoP guarantee is essential.

(Sourced from Business Recorder)