Renault suffers setback as PSM refuses to provide allocated land

Steel mill’s board says it will carry out fresh price assessment of the piece of land

ISLAMABAD: French automaker Renault has suffered a jolt in its bid to set up a car manufacturing plant in Pakistan as Pakistan Steel Mills (PSM) has refused to provide land for the facility.

A senior official of the Ministry of Industries and Production told The Express Tribune that Renault had approached the ministry with a complaint that the National Industrial Parks Development and Management Company (NIP) was asking the automaker to sign an open-ended undertaking for bearing any increase in the cost of land being provided for setting up the vehicle manufacturing plant in Karachi.



Renault, which has joined hands with local partner Al-Futtaim Automotive Pakistan (Private) Limited, had been allocated 50 acres of land for Rs1.3 billion (Rs26 million per acre). The price was to be paid in three equal installments.

However, the PSM board of directors later decided that it would carry out a fresh price assessment of the allotted piece of land and seek the revised price from the buyers.

The Economic Coordination Committee (ECC), in its meeting held on January 10, 2007, had approved the establishment of an industrial park on the PSM land. It also set the price of land at Rs7 million per acre and determined the share of both sides.

Accordingly, an agreement was signed between PSM and NIP on July 13, 2007 in accordance with the directives of the Ministry of Industries that outlined modalities for establishing the park, responsibilities of both sides and the mode of payment for the sub-lease.

Now, the Ministry of Industries, which is upset about the decision of the PSM board on conducting a fresh price assessment, has sought intervention of the cabinet for resolution of the issue.

The cabinet, in its meeting held in February 2018, was informed that since 2013, PSM being the owner of the land had been changing the price for one reason or the other, prompting several investors, who had deposited their first installments for the land, to withdraw their bids.

During discussions, the cabinet members noted that Pakistan had received such a large foreign investment after a long time and it was totally inappropriate to treat investors unfairly by inflating the agreed price of allotted land.

Investment by a French company would be good for the image of the country and open doors to further capital inflows, they emphasised and expressed their displeasure over the PSM board’s move to treat an industrial estate like real estate that discouraged industrialisation.



The cabinet was requested to resolve the land lease issue, specifically with reference to the amount to be paid by Renault and Al-Futtaim Automotive Pakistan.

The cabinet constituted a committee under the chairmanship of Privatisation Minister Daniyal Aziz that would look into the issue and give its recommendations for addressing the challenge.



Published in The Express Tribune, March 9^th, 2018.

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