KARACHI, April 7: Prime Minister Shaukat Aziz claims to have done away with the SRO culture in the country, but investors at the Karachi Export Processing Zone are desperately seeking government intervention to bring an end to what they allege ‘discrimination and favours’ granted to the Tuwairqi group at their cost through SROs.

Following a series of representations, the government has finally responded and a meeting of leaders of the Karachi Export Processing Zone Business Council has been arranged on April 17 in Islamabad with top officials of the ministry of industries and production and the Central Board of Revenue to sort out the discrimination caused by the government SROs between upcoming Al Tuwairqi Steel Mills and 97 units of the KEPZ.

Al Tuwairqi is one of the key members of the foreign and local investors group that offered the highest bid of Rs21.68 billion and won the management and ownership of the Pakistan’s only integrated steel mills set up with Soviet assistance. The same group is now setting up another steel billet mills on a large tract of land that is in the immediate neighbourhood of the privatised integrated steel mills and is at a distance from the KEPZ.

But under an SRO, the CBR declared the 220-acre land, on which the new steel mill is being constructed, as the export processing zone that gives the project total exemption from taxes on its imports.

In January this year, the government has issued another SRO that favours the Tuwairqi group at the cost of all other units located within the KEPZ.

Under an SRO461 issued in June 2004, the government had restricted all the units at the KEPZ to export only 20 per cent of their products in the tariff area of Pakistan, while 80 per cent had to be shipped compulsorily to foreign countries.

But in January this year, the Tuwairqis have been excluded from the jurisdiction of SRO461 and as and when the mills will come into production it will be allowed to market its entire products in the tariff area of Pakistan.

The chairperson of the KEPZ, a lady bureaucrat, failed to respond to the protests of investors at her zone, as one of them complained that she has been hardly in the office for one week at a stretch. “Most of the time she attends international conferences or is preoccupied elsewhere,” he said.

Tuwairqis have been given all the units of Pakistan Steel, with highly developed infrastructure facilities, quarries, inventory of raw material and products, purchased machinery and equipment, cash in hand and all the receivables.

The CBR has indemnified the prospective owners of the public sector steel mills against the past and future tax liabilities. There was no answer as to what is the impact in terms of revenue loss from the indemnity given by the CBR on taxes to the new owners.

There is no word available on the price of 220 acres of land given to the Tuwairqis for their new steel billet project near about 4,500 acres of land on which all units of the integrated steel mills are located. A top stockbroker, who is also one of the biggest real estate dealers in Pakistan, put the price of land near steel mills at Rs20 million for an acre. The same stockbroker was asked by the Pakistan Steel management in March last year to evaluate the land cost. He estimated that the land alone cost Rs27 billion.

In the last 12 to 14 years, different governments explored to privatise Pakistan Steel by offering its shares in the stock market. Stockbrokers are convinced that had the government even offered five to 10 per cent shares of Pakistan Steel in the market, investors would have readily offered at least Rs25 per share against the Rs16.80 offered by the investors group. “This would have been the best method to get a good price and associate the private sector in the management of Pakistan Steel,” a stockbroker said.

The stockbrokers have strong reservations on the formation of the investors group whose members were qualified separately. “Who brought these individual investors together and why?” is one of the questions.

The difference between the highest and second highest bid is very small and this raises many questions. The steel mills privatisation deal is now becoming a subject of hot conversation.