$6.6 million bank guarantee sought for FFL financial close by October 31: minister

The government has sought $6.6 million bank guarantee from Fatima Fertiliser (Private) Limited (FFL), for financial close, by October 31. The joint venture (JV) of Fatima Group and Arif Habib Group will have to arrange Rs 21 billion from commercial banks and Rs 12 billion as equity for the project to be established in Sadiqabad.
The bank guarantee has been evaluated by the secretaries' committee headed by Secretary Finance on the same pattern as is being applied for independent power producers (IPPs).
Addressing a press conference on Wednesday, Minister for Industries and Production, Jahangir Khan Tareen, said that the company would forfeit the guarantee if its management failed to complete financial close within 90 days (by October 31) for setting up the fertiliser plant.
Tareen defended government's decision of extending deadline for financial close, and added that it had been made clear that 'no paper work' would be accepted, and the firm has to submit ' full and final documentation from the banks', as is defined by the committee, along with confirmation of opening of Letter of Credit for the machinery and equipment and other requirements. "The deadline for FFL, of which Arif Habib is a partner, was extended in good faith as the government wanted to give them a last chance to avoid litigation," the Minister added.
The Minister said that he was not aware if Arif Habib is front man of any government functionary.
"I do not know if he is the front man of any personality. He is a rich man and he wants to invest," he said, adding that there was nothing else involved, as the government encourages everybody to invest in the country.
He said that the FFL case was discussed in the Economic Co-ordination Committee (ECC) of the Cabinet where divergent views were floated. He said that one ministry had opposed any extension, while others favoured the proposal.
He said that the issue was being speculated deliberately, and adjournment motion has been submitted by the opposition, whose main mover was PPPP's Mahmood Qureshi, who has political rivalry with the sponsors of the Fatima Group. He said that appropriate response would be given on the adjournment motion.
The FFL was allocated 75 MMCFD gas at a time when the government rejected similar requests from existing fertiliser firms and other entities like Mari Gas owing to shortage of natural gas. The minister said that the deadline had begun from August 29. If the financial close was not announced within 90 days, the company would forfeit Rs 400 million, which was to be pledged as guarantee with the government.
Tareen said that privatisation policy was unchanged, and Pakistan Steel Mill (PSM) would be privatised. He said that the government was looking for different options for PSM privatisation and a decision would be taken shortly if fresh investment was necessary to upgrade the entity so that it could be sold at a reasonable price.
"We are thinking if the government invests Rs 5 billion on upgradation of PSM, would this amount add to its sale value," he said.
He said that Pakistan Steel chairman Abdul Qayyum had been given extension till further orders by the Prime Minister. Qayum's contract ended in January last. "Now he is working on extension."
He said that new industrial policy was expected to be announced in October. Around 95 percent of work on the policy has already been completed. "The ministry of industries wants to have implementation mechanism in place before the policy is announced," he said. "Now most of the implementation mechanism is in place, and we will announce the policy most likely next month," he added. He said that the ministry had set up sectors' development companies, dairy, marble, granite, gems and jewellery, furniture, surgical goods, horticulture, sports etc.
The government, he said, also wants to formalise the Darra Adamkhel arms industry to enable it to produce export quality sporting and hunting arms. "Currently, around 6000 arms are being exported. We see the export potential of around 600,000 arms, worth around $1 billion per year," he hoped.
Tareen rejected the impression that the industrial sector had failed to attract any considerable investment. A huge investment is coming in various sectors including steel making, agriculture machinery, and soft beverages.
He said that National Vocational Training Authority had been established. This would help the government to ensure skill improvement, technology upgradation and provide skilled workforce to industrial units. The Authority would give training to raw hand workers and disseminate information about new machinery being adopted in other developing and developed countries.