ISLAMABAD: The management of Tuwairqi Steel Mills Ltd (TSML) on Wednesday announced to pull out of the country as the respective governments were seemingly not inclined to resolve their lingering issue of reduced gas tariff.

“I can assure that we don’t like to exit Pakistan but the situation is forcing us to do so,” TSML Chairman Dr Hilal Hussain Al-Tuwairqi told a press conference.

“We have only one issue that the gas feedstock tariff has to be rational as per the promises made to us in the memorandum of understanding (MoU),” he said, referring to a 2004 agreement.

Dr Hilal announced that though the TSML has not conveyed the decision to the government formally, this press conference should be taken as the official message.

He said the company will wait till the next meeting of the Economic Coordination Committee (ECC) of the Cabinet, and will exit the country in case of no decision.

The TSML, a joint venture of Saudi Arabia’s Al-Tuwairqi Group of Companies and South Korea’s Posco (formerly Pohang Iron and Steel Company), has production capacity of 1.28 million tonnes a year.

The Ministry of Industries worked out in July 2014 that the gas feedstock tariff for the TSML should be Rs123 per million British thermal units (mmbtu) based on an MoU signed by the government of Pakistan in 2004. However, the government was offering gas at Rs488 per mmbtu to the company.

TSML Country Head Zaigham Adil Rizvi said the impact on national exchequer would be less than Rs4 billion if the government agrees to give gas at Rs123 per mmbtu. “On the other hand, the government will draw around Rs4 billion a year in taxes if we continue production, besides other gains such as jobs, reduced import of steel, etc.”

Dr Hilal said: “The problem is that the government of Pakistan has never stated its position clearly in our case.” He recalled numerous letters from the company and the ambassador of Saudi Arabia to the government which were not responded to.

“In April this year Korean premier talked to Prime Minister Nawaz Sharif about TSML, but nothing has happened till now,” he said.

He said former premier Raja Pervaiz Ashraf also promised to get their issue resolved.

A Nov 25 Extraordinary General Meeting (EOGM) of the TSML was informed that the mill has been shut down since September 2013. The TSML sustained a loss of $18.6 million in 2013 and expects the same this year.

The meeting was also informed that in lieu of concessional gas tariff, the mill initially offered 5 per cent equity, then 7 per cent, and finally extended it to 15 per cent, which accounts to 126 million shares.

It will translate into 10 per cent yearly dividend to the government and a guaranteed buy-back of shares at book value, after 10 years.

POSCO’s Senior Executive Vice-President and In-charge Overseas Investments Hong-Soo Kim was also present at the press conference.

Published in Dawn, November 27th , 2014