THE patience and dedication of a tiny group to save a huge DRI (direct reduced iron) steel plant in Karachi might pay off in the end.
Hopes for the Tuwairqi Steel Mills Ltd (TSML) rekindled after six long years when the PTI government hinted at flexibility to reassess the issue, and a new overseas investor showed intent to acquire the plant and make the requisite investment once the policy is clearly spelled out.
The issue of Tuwairqi Steel was discussed in the last meeting of the Economic Coordination Committee. It accepted the Ministry of Industry’s proposal to constitute a high-powered committee to assess options to revive the dormant plant. The thrust subsequently lost steam.
Sadly, the bureaucratic shake-up and the unusual events over the past few days again relegated the issue down on the agenda of the relevant quarters. It is not surprising that the committee that included top advisers and secretaries did not meet and chances are thin that it will complete the assigned task anytime soon.
Without divulging details, Razzak Dawood, the adviser to prime minister for commerce, textile, industry, production and investment, told Dawn that the government is keen to promote and support industry and is ready to resolve all outstanding issues to rebuild investor confidence. On the TSML, he said he would be in a better position to share details later, but he advised not to lose hope.
‘The government may find it hard to quell fears and doubts of investors as long as the country’s industrial landscape is littered with projects rendered dysfunctional because of its inconsistency and inability to honour commitments’
Secretary industry Amir Ashraf Khawaja, who moved the summary in the last ECC, has since been shunted out and transferred to the Ministry of Climate Change. Afzal Latif, who assumed the charge in his place last week, is settling down and not expected to push the issue of concessions to a dormant unit in the face of stern opposition from the powerful Ministry of Finance.
Other senior officers familiar with the issue told Dawn that chances of a TSML-specific package is out of question. “My understanding is that concessions, if at all agreed upon, will be directed for the steel sector and not any specific investor. As for who will support or oppose the package, my guess is as good as yours,” said a deputy secretary privy to the background.
The process of setting up a fairly advanced vertically integrated steel plant in the private sector by foreign investors was initiated during Musharraf’s period and advanced under the PPP government when former prime minister Yousaf Raza Gillani signed a concession deal with the TSML.
As a result, a technologically advanced DRI steel plant having a production capacity of 1.28 million tonnes per year was set up. But before investors can mobilise funds for backward and forward integration, the project hit a snag under the PML-N government that declined to accept the deal signed by their predecessors.
Tuwairqi Steel, a joint venture of Saudi and South Korean investors, had to be shut down in September 2013, barely six months after commissioning in January that year. During its operation, it produced and sold 60,300 tonnes of fine steel, though at a loss for higher than initially agreed feedstock gas tariff.
The audit report of the TSML projected a loss of $18.6m in 2013. The company had to suspend operations after its negotiations with the PML-N government on concessions broke down. About 1,000 workers had to be laid off. Only a small team was retained to keep the plant in running condition, in anticipation of a resolution of outstanding issues or the plant’s disposal.
All later efforts by the proprietors to engage with the PML-N government after the closure of the plant proved futile and the conflict propelled to land in the international court of arbitration as bank guarantees were called out and the consortium of investors tried to chop their losses.
Several court cases are still pending, but to keep the $340m Japanese plant from turning to scrap in a corrosive environment of Port Qasim, its maintenance has been somehow afforded by the TSML at a staggering cost of $60,000 to 70,000 per month over the past six years.
The management of the TSML was reluctant to come on record at the current critical point when a PTI government’s decision can make the plant swim or sink, this time for good. Moreover, the prospective investor, Ciena Group of the United States (owned by M. Ashraf Qazi, an American of Pakistani descent), is desperately waiting for the government’s decision to start
the process of a takeover from an unhappy Saudi investor who “burnt his fingers” in the project in Pakistan.
Mr Qazi, with no prior experience in the sector, was won over by the team TSML. He was not accessible, but it was confirmed by multiple sources in relevant circles that he was ready for the plunge. “He has been interacting with the government hierarchy and presumably ready to invest $700m to acquire 84pc shares of the company currently with the Saudi consortium and to invest in backward and forward integration as soon as the government express its intent of support,” an informed source told Dawn privately.
It is still an unsolved riddle as to why the PML-N government turned its back on the TSML when Nawaz Sharif government is reputed to be pro-private sector and urban elite as opposed to PPP that has rural political base.
Some stalwarts of PML-N, including Mohammad Zubair and Shahid Khaqan Abbasi, fumbled while explaining the aversion of the then finance minister Ishaq Dar to anything related to the TSML. Murtaza Jatoi, the minister of industry in Nawaz Sharif’s cabinet, shared with this
writer his sob stories of insult and humiliations every time he tried to push the case of the said steel plant.
There is some sense of relief in the TSML team that astonished the global steel experts by their performance. After the shutdown in September 2013, they worked with patience, dedication and unmatched skill for six years to keep the plant fit through regular preventive maintenance, mothballing, cold commissioning, etc. The evaluation by the technical audit report of MIDREX endorsed the near perfect health of the plant in a highly corrosive environment.
“The prospects of industrialisation and sustainable growth will remain clouded, despite the need and natural advantages, until politicians grasp the value of credibility in the business world irrespective of their party association,” commented a business leader.
“The government may find it hard to quell fears and doubts of investors as long as the industrial landscape of the country is littered with
projects rendered dysfunctional because of its inconsistency and inability to honour commitments owing to afterthoughts,” he added. “The very sight of Tuwairqi’s huge DRI steel plant standing tall but idle next to now rotting infrastructure of Pakistan Steel Mills, in a steel import–dependent country, should be a sufficient evidence of state recklessness and messed-up priorities of policymakers vested with the responsibility to tend to the economy.”
Published in Dawn, The Business and Finance Weekly, December 9th, 2019