Land for industrial park: Cabinet reprimands PSM board for creating ''hurdles''

The Cabinet has reportedly reprimanded Pakistan Steel Mills'' (PSM) Board of Directors (BoD) for allegedly creating hurdles in allocation of land to the potential investors and discouraging industrialization in the country, sources close to Additional Secretary In-charge Ministry of Industries and Production told Business Recorder. On February 20, 2018, the Cabinet was informed that in 2007, the ECC had approved the establishment of an industrial park on the land of PSM.
The ECC also approved the price of land at Rs 7 million per acre plot and determined the share of both organisations. Accordingly, an agreement was concluded between PSM and NIP on July 13, 2007 in pursuance of directives of MoI&P detailing the modalities of establishment of the park, responsibilities of both organisations in this regard and payment mode of the sub-lease proceeds.
According to sources, the Cabinet was informed that since 2013, PSM, being owner of the land, has been, changing the price of land for one reason or the other with the result that several investors, who had deposited first installment for the land, withdrew their bids.
The sources said, the Cabinet was briefed that French Group M/s Renault had complained that NIP had asked them to sign an open-ended undertaking for payment of any increase in the cost of land provided for building a car manufacturing plant in Karachi. The Group Renault, operating through its local partner Al-Futtaim Automotive Pakistan (Pvt) Ltd had been allotted a 50 acre plot at Rs 1.3 billion at the rate of Rs 26 million per acre. The amount was to be paid in three equal installments. However, the Board of PSM has decided to carry out price assessment of the allotted land afresh, and apply the revised valuation on buyer.
During the course of discussion in the Cabinet, it was observed that Pakistan had received such a large foreign investment after a long time and it was totally inappropriate to treat investors to inflating the agreed price of allotted land. Investment by French company will be good for the image of the country and open the doors for further investment.
The Cabinet showed its displeasure at the PSM Board for treating an industrial estate like real estate and discouraging industrialization. Additional Secretary In-charge MoI&P Mian Asad Haya-ud-Din held a couple of meetings with Minister for Privatisation Daniyal Aziz to discuss land price issue with him before finalization of a report for the Cabinet. Earlier on February 8, 2018, the issue of land price also came under discussion at the PSM Board meeting.
CEO (PSM) informed the Board that the statement of allotment of land provided by M/s NIP to PSM from time to time differed. He stated that the CEO NIP had informed the PSM that a total 594 acres land out of 930 acres has been allotted by NIP as of June 30, 2017. However, recent discussions with NIP management and scrutiny of record revealed that only 211 acres of land had been allotted up to June 30, 2017. As such, approximately 539 acres land was still un-allotted and its price will be based on valuation being carried out by PSM for 2017-18. He also added that in the past, M/s NIP has not fully complied with the terms and conditions of the agreement between the NIP and the PSM in letter and spirit.
However, NIP CEO Mudassir Iqbal apprised the board that PSM had agreed in its letter of September 6, 2017 that 522.24 acres land allotted in 2016-17 will carry a tag of Rs 13 million as PSM share. He also added that if allotment of any plot was cancelled, NIP had the right to re-allocate the plot to other applicants and PSM should not demand a new rate for these plots.
He also presented a fresh statement to the Board, according to which, an area of 70.111 acres was allotted to 7 allottees till September 17, 2015 (serial number 1-8) whereas an area of 153.814 acres was allocated to 7 allottees till May 5, 2017 (serial number 9-15). As such a total area of 223.925 acres was allocated till June 30, 2017. The payment for these allotments was also paid to PSM according to its share. He further added that NIP has allotted an area of 368 acres since July 2017(serial number 16-25). He requested PSM Board that these allotments may be considered at Rs 26 million per acre with PSM share of Rs 13 million per acre. He argued that if NIP plea was not accepted, the organisation will sustain a loss.
Secretary Privatisation, Irfan Ali observed that there is an agreement between PSM and NIP. Both the parties are legally bound to comply with the terms of agreement in letter and spirit. He observed that the plea of NIP has to be examined in the light of principle enshrined in the agreement between PSM and NIP. He read out the terms of the agreement and pointed out that as per the conditions stipulated in the agreement, after 2012, the PSM is entitled to annually communicate the cost of land to NIP. As such, for allotments which not been made up to June 30, 2017 and the first installment has also been paid till that date, the rate of 2016-17 will not apply.
In view of the replies given by CEO NIP to the questions asked by Secretary PC, the latter concluded that the parties who have not been allotted plots in 2016-17, the rate of 2016-17 will not apply. He elaborated that in case the ten allottees are allotted land in FY 2017, the rate determined by PSM through valuation for 2017-18 will be applicable.
After detailed discussion, the Board also directed that the NIP shall ensure that the payment received from allottees is transferred to PSM in accordance with its prescribed share without any delay.
The Board further requested CEO NIP to furnish a projected cash flow statement of receipts from the allottees for the entire land as soon as the tentative valuation of land for 2017-18 is received from the PSM. The Board directed PSM that in future the valuation process of land be completed by August of every year.