ECC reviews plan to revive Tuwairqi Steel

Updated November 29, 2019

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TSML has been non-operational since 2013 following the management’s dispute with the then government over gas supply. — Tuwairqi Steel website/File
TSML has been non-operational since 2013 following the management’s dispute with the then government over gas supply. — Tuwairqi Steel website/File

ISLAMABAD: Ministry of Industries on Thursday forwarded a plan to the Economic Coordination Committee (ECC) for the revival of the Tuwairqi Steel Mills (TSML) requesting cheap gas supply, tax exemptions and threshold for new investment to make the state-of-the-art steel mill operational.

The TSML has been non-operational since 2013 following the management’s dispute with the then government over gas supply.

The proposal submitted by the ministry of industries noted that local steel firms were not in a position to invest minimum threshold of $500 million in the steel sector. The ministry’s summary suggested the TSML was seeking subsidy on gas after three years of operating the mills.

The committee meeting constituting an inter-ministerial committee was chaired by the Planning Minister Asad Umar. Other members included Federal Board of Revenue chairman, commerce adviser, special assistant to PM on petroleum division, secretary finance and secretary industries.

The summary highlighted that the government incentives were necessary to promote Direct Reduced Iron (DRI) to the new investors in the sector; however the proposal was opposed by the finance ministry on the basis that incentives would eventually benefit only TSML, as it was the only setup with DRI plant.

The TSML is a joint venture project between the Al-Tuwairqi Group of Companies of Saudi Arabia and a South Korean steel giant established at Bin Qasim Industrial Area Karachi over an area of 220 acres.

The fallout between the government and the mill’s management back in 2013 came after the TSML officials requested gas supply at the rate of Rs123 per million British thermal units (mmBtu) in order to effectively operate the plant which was declined by the government on the grounds that it would amount to a subsidy of Rs25 billion over a period of five years.

The TSML maintained that cheaper gas was needed as the Phase-I of DRI plant had been completed at a cost of $340 million, while the capital injection in Phase-II and III was expected to be in the range of $850-900m.

While the ministry of industries has suggested that the government provides gas at the cost of $4.65 per mmBtu to a DRI unit on first-come-first-serve basis to be used as feedstock for a maximum period of up to 10 years.

“The investor under Greenfield category shall be entitled to receive the system gas supply on commissioning of the unit and the investor under Brownfield category shall be entitled to receive system gas supply alter three years of signing the agreement. This shall be reviewed alter every five years,” the summary said.

In case of non-availability, the government would help provide gas through other available resources including imported Re-gassified Liquid Natural Gas as the industrial units operating on DRI need regular supply of natural gas as a feedstock to produce approximately 97 per cent pure iron from ore.

Besides, the ministry of industries also sought tax exemptions for new investors as well as new investment to revive existing plants.

For export of DRI products under this framework, the government should encourage similar units to be set up in Export Processing Zones or Special Economic Zones subject to land availability.

Published in Dawn, November 29th, 2019