Minister for Industries and Production (MoI&P), Ghulam Murtaza Khan Jatoi has convened a meeting of all stakeholders on Wednesday (tomorrow) to resolve a dispute on land between Pakistan Steel Mills (PSM) and National Industrial Park (NIP). The meeting has been convened at a time when the federal government has provided due diligence report to the Sindh government so that the latter can prepare its final stance. Insiders claim that Sindh government will not be ready to acquire Pakistan Steel Mills until the federal government offers attractive incentives.
On the other hand, the Sindh government has also prepared a strong case to challenge privatisation of land given for the purpose to establish a steel mill. An official document of PSM reveals that in compliance of an ECC decision of February 1, 2007 930 acres was handed over to NIP for development of an industrial park. The price of the land was fixed @ Rs 7 million per acre which includes the cost of land @ Rs 1.5 million per acre and cost of development charges @ Rs 5.5 million per acre.
As per Article 5.1 of the agreement "PSM and NIP agreed that pursuant 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".
There is a strong impression in different quarters including Sindh government that since the steel mills plant has stopped production due to suspension of gas supply; all efforts are being made to sell the land. As per article - 13 (a) of the agreement "This agreement supersedes and cancels all previous agreements, commitments or representations oral or written, in respect thereto".
M/s NIP has allocated plots measuring 50.275 acres & 5.027 acres to M/s Yamaha Motors & M/s MID Coil Centre through provisional allotment letters of November 08, 2013 & April 25, 2014 and fixed the price of land including development charges @ Rs 8.5 million per acre ad Rs 12.5 million per acre respectively without the consent of Pakistan Steel.
The official document cited the CEO (NIP) as stating in a letter of March 06, 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 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 request 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 informed in its letter of March 24, 2014 that "This Ministry approves/supports the contents of NIP letter of March 06, 2014". M/s NIP offered Pakistan Steel to accept 21.428 % of total sale value as land cost which was not accepted as the said formula for distribution of land cost and development charges was fixed for five years ie upto July 12, 2012. After that price of each plot will be mutually reviewed by PSM and NIP on annual basis with mutual consent 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. Before signing of the agreement with M/s Yamaha, several meetings were held between PSM and NIP to settle the matter amicably. At that time the value of NIP land was Rs 5/- million per acre and the same value was incorporated in the books of accounts of Pakistan Steel.
After a detailed discussion, M/s NIP agreed for payment of land cost @ Rs 5/- million per acre. Out of which they agreed to pay pay Rs 91.5 million @ Rs 1.82 million per acre in the shape of pay order and to submit certificate of investments of Rs 165 million @ Rs 3.18 million per acre. These certificates would be jointly endorsed in favour of PSM and NIP which will be paid to PSM or NIP as the case may be, within one month after decision of PSM Board.
Accordingly, M/s NIP paid an amount of Rs 91.5 million on April 11, 2014 and submitted two certificates of investment of Rs 165 million on April 17, 2014. Lease deed with M/s Yamaha was signed on the same date. The said certificates of investments amounting to Rs 165 million were sent to issuing bank ie Pak Oman Investment Company Limited on April 21, 2014. They said that Pak Oman Investment Company Limited has no such policy to verify the endorsement on investment certificates issued by them. It was further apprised that these certificate of investments had also matured on July 14, 2014 and May 07, 2014.
Accordingly M/s NIP was informed in a letter of April 23, 2014 and requested to provide bank guarantee of the same value. Furthermore, M/s NIP was also requested on December 17, 2014 and January 12, 2015 to provide bank guarantee but in spite of commitment they have not submitted the bank guarantee so far ie M/s NIP has not fulfilled the promise.
PSM management further stated that its entire land was evaluated by an independent valuer in 2011 and as per that evaluation report, the value of the 930 acres NIP land was Rs 5/- million per acre which was incorporated in the books of accounts of Pakistan Steel as on June 30, 2012. The Chief Minister Sindh has approved the rate of undeveloped land in Deh Pipri Bin Qasim Town @ Rs 6/- million per acre which includes NIP land and the same was published in gazette on July 5th, 2011. In compliance of BoD directives, NIP land was evaluated in June 2014 through an independent evaluator @ Rs 6/- million per acre and the same value is also incorporated in PSM books of accounts.
Pakistan Steel has leased out 11 acres of land to M/s SSGC at the end 2014 @ Rs 8.5 million per acre for setting up metering/tolling system for LNG terminal while the value of said land as per evaluation report of 2014 was Rs 5/- million per acre. As per draft valuation report of PSM land prepared by land valuer, M/s Iqbal A. Nanjee & Co appointed by Privatisation Commission, the value of remaining 874.698 acres NIP land is Rs 13 million per acre. Privatisation Commission is insisting on incorporation of the said value of PSM land in books of accounts.
PSM's board of Directors in its meeting November on 21, 2014 formed a committee and the convenor to be nominated by Secretary MoI&P with one member from PSM Board of Directors namely Engr. Abdul Jabbar Memon; another member is to be nominated from NIP Board of Directors to settle the price and terms and conditions for allocation of land for the plots carved out from 930 acres land handed over to M/s NIP by PSM for development of Bin Qasim Industrial Park in accordance with the existing agreement. PSM requested Secretary (MoI&P) on January 20, 2015 for constitution of a committee comprising an official not below the rank of Additional Secretary from MoI&P and one member each from Board of Directors of PSM and NIP.
Khalid Mahmood, Section Officer (MoI&P) conveyed the approval of MoI&P in a letter of January 26, 2015 for constitution of a committee under the chairmanship of Additional Secretary - II of MoI&P, Engr. Abdul Jabbar Memon from PSM Board, a representative from Board of Investment (BOI) Islamabad and a representative from NIP for settlement of price, terms and conditions for allocation of land for the plots carved out from 930 acres land handed over to M/s NIP by PSM for development of Bin Qasim Industrial Park in accordance with the existing agreement.
The committee decided in its meeting on May 25, 2015 that "25% of the sale price of 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 BQIP Karachi". PSM Board has directed to form a committee of three members: convenor from MoI&P, Engr. Abdul Jabbar Memon from PSM Board and one member to be nominated from NIP Board while MoI&P has constituted the committee comprising of four members, one extra from Board of Investment.
The committee decided the matter on May 25, 2015 wherein five officials attended the meeting which is against the decision/directives of PSM Board. The Board was apprised in its meeting held on July 24, 2015 of the decision of the committee taken on May 25, 2015. The Board advised PSM management to prepare a suitable / comprehensive case for protecting the interest of Pakistan Steel and send it to ECC for their perusal/favourable decision through Privatisation Commission in the present circumstances when Pakistan Steel is itself facing a liquidity crunch.
The matter was placed again before BoD on October 02, 2015 wherein BoD advised PSM management to negotiate with M/s NIP in line with the agreement. The benchmark for selling the plots shall be the prevailing market price. The matter was negotiated with NIP on October 06, 2015 and October 26, 2015 but remained unresolved. The BoD again discussed the matter on November 04, 2015 and advised PSM management to negotiate with M/s NIP in line with the agreement. The benchmark for selling the plots will be the prevailing market price and apprise them of the revised terms and conditions along with price mechanism as well as to sign a lease agreement with M/s MID Coil Centre on the pattern of M/s Yamaha Motors.
Accordingly, M/s NIP was informed on October 12, 2015 that PSM is agreed to sign with M/s MID Coil Centre on the pattern of M/s Yamaha Motors but M/s NIP did not respond in this regard. The BoD was also apprised on November 18, 2015 about the issue wherein BoD authorised CEO Pakistan Steel to negotiate with M/s NIP to settle the issue amicably in the light of the agreement.
Accordingly, CEO (NIP) was invited to discuss and settle the issue on January 20, 2016. The matter was discussed in detail and CEO (NIP) was informed that in case of acceptance of cost of land as per decision taken by the committee on May 25, 2015, PSM Management has to face audit observation and legal complications as the value of said land incorporated in books of accounts is Rs 6 million per acre. CEO (NIP) has stated that he will forward a detailed proposal in this regard.
As per article - 17.1 of the agreement of July 13, 2007, "Unless amicably settled through mutual consultation between the parties, all disputes controversies or differences which may arise between the parties or any of them out of or in relation to or in connection with this agreement, including any question regarding its existence, validity or termination, shall be referred to and finally resolved by arbitration in accordance with the Arbitration Act, 1940" and as per the Article - 17.2 of the agreement, "Secretary MoIP&SI, Government of Pakistan shall be the sole arbitrator, except where the GoP is a party to any dispute, controversy or difference hereunder, in which case PSM, NIP and GOP shall jointly appoint a sole arbitrator mutually acceptable to the parties to arbitrate such dispute controversy or difference who shall be appointed within seven days of a notice being served by any party hereto, failing which a sole arbitrator shall be nominated pursuant to the Arbitration Act". An official told Business Recorder that Ministry of Industries and Production, which is the administrative Ministry of both the PSM and NIP, will sort out the land dispute.
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