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Closure of TSML to discourage foreign investment, KCCI asks Dar to take action

Closure of TSML to discourage foreign investment, KCCI asks Dar to take action

KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) has cautioned the government that closure of Tuwairqi Steel would send a negative message to potential foreign and local investors.

In a letter sent to Finance Minister Ishaq Dar, KCCI President Iftikhar Vohra urged the minister to take up the matter of gas supply at concessional rates to Tuwairqi Steel Mills Limited (TSML) in the upcoming Economic Coordination Committee (ECC) meeting.

He told the minister that TSML approached the KCCI to resolve the issue and getting approval of concessional rate for supply of gas.

Vohra in the letter cautioned that closure of a steel plant with significant foreign investment would send a negative message to potential foreign and local investors and would lead to further decline in FDI.

“Moreover, the country will lose a state-of-the-art steel production facility which is among the best in the region while a large number of workers including engineers will be rendered unemployed,” the letter added.

Vohra said that delegation of TSML headed by Country Head Zaigham Adil Rizvi, accompanied by POSCO Pakistan Resident Director Yoo Young-Ho visited the chamber and sought assistance in restoring gas supply to the steel plant of TSML in Sindh at the concessional rate of Rs 123/mmbtu, as committed by the Government of Pakistan at the time of memorandum of understanding signing.

TSML delegation informed that the project is a joint-venture of Al-Tuwairqi Holding of Saudi Arabia and POSCO of South Korea which is being set up at Port Qasim Karachi and on completion of its integration, this project would be the largest steel complex in Pakistan.

They said that the Phase-1 of the project, having 1.28 million tonnes per annum capacity DRI Plant of a state-of-the-art Japanese technology, was completed in 2013, with an investment of $340 million.

The plant, after its successful 100 percent capacity test run remains shut since September 2013 because the operation became commercially unviable due to the high tariff of natural gas being used as Feedstock and very long delay in approval of concessional tariff of Rs 123/mmbtu, by the ECC, they added.

TSML delegation pointed out that the project was supposed to ensure a host of econometric and collateral benefits, including creation of jobs for another 5,000 people.

They also informed that in lieu of concessional gas tariff, the TSML has offered 15 percent (126 million shares) of its equity as preferred shares, with 10 percent dividend per annum to the government and a guaranteed buy-back of shares at book/break-up value after 10 years.

Despite the fact that the plant is in a ‘shutdown mode’ for the last over one year, still not a single employee of TSML has been laid off so far, with the hope and keen desire that the operations would restart, they added.

TSML delegation further said that the prevailing situation was a cause of concern for other industrialists as well and a de-motivating factor for further foreign investment in Pakistan. If the plant doesn’t become operative, there is an apprehension of a lay-off of around 1,100 employees, which evidently be quite an untoward situation and would tarnish the image of our country among the foreign investors, Vohra informed the finance minister.