Pakistan Steel Mills (PSM) Board of Director (BoD) has directed the management to take up the issue of the price of plots' being sold by the National Industrial Parks (NIP), well informed sources in PSM told Business Recorder.
PSM officials recently informed the Board that Pakistan Steel handed over 930 acres undeveloped land to M/s National Industrial Parks Management & Development Company in the year 2007 for development of an industrial park with the approval of Economic Co-ordination Committee of the Cabinet.
Accordingly an agreement between NIP and PSM was executed on July 13, 2007. As per clause 5.1 of agreement "PSM and NIP agreed that pursuance to the GoP letter, the price of each plot of the land shall be Rs 7/- million per acre which includes Rs 1.5 million per acre for the cost of land while the remaining amount of Rs 5.5 million is the cost of infrastructure development charges. Provided that NIP and PSM agree that the price of each plot of the land mentioned in the GoP letter shall be mutually reviewed by NIP and PSM after a period of 5 years from the date of the agreement and thereafter on an annual basis where after any increase in the amount shall be determined by PSM and NIP on the basis of situation existing at the time of the said revision".
M/s NIP violated the terms and conditions of the agreement as they handed over the possession of plots to M/s Yamaha and M/s MID Coil Center and finalised the land cost @ Rs 8.5 million and Rs 12.5 million per acre respectively without consent of Pakistan Steel. PSM demanded its share as per land value incorporated in the books of accounts @ Rs 5/- & 6/- million per acre in case of M/s Yamaha & M/s MID Coil Center respectively but M/s NIP did not agree.
CEO (NIP) stated in his letter of March 6, 2014 that "he had discussed the matter with Secretary (MoI&P) who had opined that the matter shall not be delayed due to internal adjustments between two sister organisations ie PSM and NIP. He was of the concerted opinion that the sub-lease in favour of M/s Yamaha shall be executed henceforth on the quoted price subject to approval by PSM Board, whose decision shall be abiding to NIP. NIP fully endorsed the opinion of Secretary (MoI&P) and requested PSM to communicate an early date for signing of the sub-lease deed in favour of M/s Yamaha accordingly with the commitment that the decision by the PSM Board will not be contested by NIP".
MoI&P noted on March 24, 2014 that "This Ministry has approves / supports the contents of NIP letter of March 6, 2014".
A committee was constituted for fixing the price of NIP land which decided in its meeting held on May 25, 2015 that "25% of the sale price of the each plot will be given to PSM as cost of land and 75% of sale price of each plot will be share of NIP for development of infrastructure of Bin Qasim Industrial Park (BQIP) Karachi".
The Board was apprised of the decision of committee in its meeting held on March 24, 2015. The Board after deliberations and debate at length advised the PSM Management to prepare a suitable / comprehensive case for protecting the interests of Pakistan Steel and forward it to the ECC for their perusal/favourable decision through Privatisation Commission in the present circumstances when Steel Mills itself is facing liquidity crunch.
According to sources all pros & cons have been considered forthwith. In case of acceptance of the decision of the committee, PSM share will be 25% of the total sale value ie Rs 3,125,000.00 per acre and Pakistan Steel will be deprived of Rs 2.673 billion on total NIP land @ 2,875,000.00 per acre as the value of said land incorporated in the book of accounts is Rs 6/- million per acre.
The Board was further informed that the said decision of the committee is not feasible / justified and acceptable to PSM on the basis of following fact: PSM and NIP have to follow the terms and conditions of agreement executed on July 13, 2007 between the two parties whereupon one Additional Secretary and two Joint Secretaries of MIOP&SI signed as witnesses on the agreement. Article-13 of the agreement provides that "This agreement supersedes and cancels all previous agreements, commitments or representations, oral or written in respect thereto and this shall not be changed or modified in any manner" and as per Clause 5.1 of the agreement The price of each plot of the land shall be mutually reviewed by NIP and PSM after a period of 5 years from the date of this agreement and thereafter on an annual basis where after any increase in the amount shall be determined by PSM and NIP on the basis of situation existing at the time of the said revision".
The sources said, NIP land was evaluated in the year 2011 by an independent evaluator; M/s Anjum Adil & Associates @ Rs 5/- million per acre and the same value has also been incorporated in the books of accounts of Pakistan Steel. As per gazette published on July 5th, 2011, Sindh Government fixed the rate of undeveloped land in Deh Pipri @ Rs 6/- million per acre which includes NIP land. In compliance of BoD directives, NIP land was evaluated afresh in June 2014 @ Rs 6/- million per acre and the same value is also incorporated in the books of accounts accordingly. Pakistan Steel has recently leased/sold out 11 acres land @ Rs 8.5 million per acre to M/s SSGC for setting up metering/tolling system for LNG Terminal.
It was further revealed that as per draft due diligence report prepared by land valuer M/s Iqbal A. Nanjee & Company, the value of PSM main plant core land adjacent to NIP land is Rs 16/- to Rs 17/- million per acre.
This decision of the committee of May 25, 2015 may create legal complications and audit observations in future.
CEO PSM has expressed serious concern of PSM management in respect of the price / share of industrial plots being sold by M/s NIP because cost of bare land is 5-6 million and M/s NIP should recover the development charges from the buyer. PSM has right to get the cost of bare land mentioned in books of accounts and PSM cannot sell the land below the mentioned price to avoid audit objection.
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