ISLAMABAD: Amid delays in the resolution of legal issues, the board of directors of defunct Pakistan Steel Mills (PSM) has refused to accept the unilateral evaluation of its land by Sui Southern Gas Company Ltd (SSGCL).

The board in its meetings held on March 29 and April 7 “has shown great concern over delay in issuance of No-Objection-Certificate (NOC) for transferring PSM’s core operating assets to Steel Corp Private Ltd (SCPL) and non-withdrawal of litigation,” wrote the PSM to the SSGCL last week.

The board asked the SSGC to withdraw its litigation and issue the requisite NOC to transfer the PSM’s assets to the SCPL on an urgent basis to avoid further delay in PSM’s revival and privatisation process.

It, however, warned that as this matter had been going on for over two years and PSM has acted in good faith to accommodate SSGC’s demands, “any further delay will force PSM to review its position, options and the terms it has offered to settle this matter”, said the letter.

Asks gas utility to issue NOC for transferring assets to Steel Corp

The development came about two weeks after the SSGCL asked the management of PSM, the country’s largest distressed and closed industrial enterprise since June 2015, for a final meeting on the finalisation of mills’ outstanding liabilities that the gas company’s management has worked out at Rs48 billion as of Dec 31, 2022.

The differences emerged after the SSGCL got the valuation of PSM’s 1,400-acre land done by its choice evaluator at a much lower rate than a price evaluated by an independent evaluator jointly appointed by PSM and SSGCL.

The SSGCL has set a series of arrangements and conditions for the PSM to complete and has blocked the issuance of NOC against the PSM’s factory area (about 1,230 acres) and machinery required for the privatisation of the mill.

The PSM’s privatisation process initiated in 2018-19 by the PTI government and continued by the incumbent government remains under clouds in the absence of any clearance from the Council of Common Interests (CCI), without a land-related NOC from the government of Sindh and without taking into confidence the employees who hold 12pc shareholding in PSM.

In its latest communication, the PSM put on record that the Cabinet Committee on Privatisation and the Federal Cabinet decided in August 2012 that subject to the issuance of a Letter of Comfort (LOC) by the Ministry of Finance, SSGCL “shall withdraw litigation/stay orders against PSM” and issue the NOC to the PSM for its assets transferring.

The mills’ board regretted that despite the issuance of LOCs twice by the Ministry of Finance followed by an amended LOC as per the demand of SSGCL, the gas company neither lifted the stay order nor issued the requisite NOC.

Subsequently, various meetings at the federal level required the SSGCL to amend the recovery suit by excluding the charge on the assets (PSM machines and equipment etc) and related 1,230 acres as the remaining assets would be more than sufficient to cover amounts claimed by SSGCL.

Instead, the SSGCL offered to acquire the PSM land on a lease basis against its receivables in June 2022. “Since then, SSGC’s demands have continuously been increasing/changing over time”, stated the PSM letter.

The letter added that the PSM board allowed the leasing out of the land to SSGC for 30 years to adjust the principal payable amount of Rs23bn to SSGC after a fresh valuation to be carried out by PSM management through an independent valuator. This lease was also allowed subject to the condition that the said land will only be utilised by SSGC for the establishment of LNG terminals and industrial facilities in return for NOC to be provided by SSGC immediately for PSM core assets.

On SSGCL’s demand, the PSM also gave up its condition for the LNG terminal and allowed the utilisation of land for industrialisation.

After various meetings of stakeholders including the federal ministries concerned, the Petroleum Division directed the SSGCL to finalise the land issue against the principal amount and undisputed late payment surcharge, amend its suit in Sindh High Court to exempt 1,230-acre with machines from litigation and issue the NOC for PSM’s requirements in Securities and Exchange Commission of Pakistan within 20 days.

As a result, both the companies — SSGCL and PSML — jointly appointed a third-party land

price evaluator — KG Traders — proposed by SSGCL which worked out the market value of the said 1,400 acres at about Rs55bn at the rate of Rs39.3 million per acre based on prevailing property/real estate market.

Published in Dawn, April 25th, 2023