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ISLAMABAD: The Pakistan Steel Mills (PSM) has opposed a bid by the Sui Southern Gas Company Ltd to take over its 1,400 acres for Rs43 billion, a valuation the mill’s management has described as “one-sided”.
The takeover bid has been made against the mill’s outstanding liabilities that the gas company’s management has worked out at Rs48bn as of Dec 31, 2022.
Informed sources told Dawn that the SSGCL had asked the management of the PSM — the country’s largest distressed and industrial enterprise that has remained closed for some eight years — for a final meeting to settle the matter.
The PSM’s caretaker management, however, believes that not only the land evaluation price offered by the gas company is one-sided and precariously low, but also the working for liabilities is unfair and strings attached to the offer are unacceptable.
But the SSGCL and its board have argued that they want to protect the interests of the company and its shareholders. As a precaution, the gas company has set a series of arrangements and conditions for the PSM to complete and has blocked the issuance of a no-objection certificate (NOC) against the mill’s factory area (spanned over 1,230 acres) and machinery required for privatising the mill.
Interestingly, the Supreme Court of Pakistan had a standing order that selling any of PSM’s assets and properties cannot be allowed against the settlement of liabilities because the steel mill belonged to the public.
More strangely, the Council of Common Interests has not yet approved any fresh proposal for privatising the mill or selling its properties. The Sindh government has also not yet consented to dispose of the PSM land and has repeatedly put on record that spare land not in the use of the mill had to return to the provincial government anytime its other utilisation comes up.
The SSGCL wrote to the steel mill a few days ago that its board had endorsed the commitment “to facilitate the privatisation of PSM and in principle agreed to issue NOC to PSM for 1,229 acres of land, plant and machinery subject to conditions”.
Both companies earlier jointly appointed a third-party land price evaluator, K.G. Traders, which worked out the market value of the 1,400 acres at about Rs55bn — or Rs39.3 million per acre — based on the prevailing real estate value.
The SSGCL, however, decided to have a re-evaluation through its own evaluator, Iqbal A. Nanji & Co, who reportedly put the price tag at Rs32m per acre — or around Rs43bn — after excluding about 43 acres under a nullah (Badal Naala).
Interestingly, the entire valuation of the steel mill under its privatisation had been worked out at about Rs60m per acre. At this rate, only the real estate value of PSM’s 18,600 acres worked out at Rs1.116 trillion.
The SSGCL has now asked the steel mill to give additional land as advised by Nanji & Co — which is a total of 1,505 acres against the settlement of Rs48bn liabilities and yet the SSGCL will have a charge on the remaining land of PSM against the non-admitted amounts.
Also, it would be the responsibility of the PSM to provide a no-objection certificate from the Sindh government, which has claimed ownership of the subject land.
Besides, the SSGC has asked the steel mill to sign a chart of land holdings of the entire 18,600 acres along with allocations and leases before a settlement deal could be signed.
On top of this, the gas utility has also directed the mill to notarise the fact that after transferring 1,505 acres to SSGCL and 1,229 acres to Steel Corp, the total value of the remaining 15,866 acres stands at Rs507.7bn at the rate of Rs32m per acre.
However, PSM’s board members were strongly averse to allowing such a transaction. They pointed out that actual gas dues stood at Rs23bn besides a 3pc late payment surcharge under the gas sales agreement.
Published in Dawn, March 20th, 2023
