Land price of CPEC SEZ approved by PSM BoD

The Board of Directors (BoD) of Pakistan Steel Mills (PSM) has approved Rs 22 million per acre price for Special Economic Zone (SEZ) to be established under the China Pakistan Economic Corridor (CPEC) on the instructions of Ministry of Industries and Production (MoI&P), well-informed sources told Business Recorder.
The decision was taken at a meeting of the BoD held in Karachi under the chairmanship of Engineer Memon Abdul Jabbar. The Board, sources said, has also approved an upfront payment of 35 per cent, in addition to freezing the price for the next three years.
The sources said, directives of Secretary Ministry of Industries and Production were placed before the PSM Board in its 395th meeting held on March 3, 2018. The Board decided that the proposal to earmark 1500 acres of PSM land for CPEC-related Special Economic Zone is approved in principle. The modalities regarding price, terms and conditions of lease/licence, timing of cash flows, annual increase in price/value etc will be negotiated with BoI and MoI&P by the committee comprising the following members: (i) Engineer Memon Abdul Jabbar- Chairman PSM Board;(ii) shakeel Ahmed Mangnejo-CEO PSM;(iii) Dr Iftikhar Ali Shallwani- Additional Secretary (MoI&P); (iv) Raziuddin-CEO (KPK-OGDCL) and ;(v) Arif Sheikh- acting CFO(PSM).
The committee in its meeting discussed the proposal from Additional Secretary Incharge MoI&P on allocation of land for CPEC- SEZ. He cited his meeting with Secretary BoI wherein it was decided that approximately 1500-3000 acres of land will be required for establishment of a Special Economic Zone for CPEC in BQIP which has also been agreed upon in principle by the Chinese side. It was also decided that the price of land would be capped till the end of CPEC project subject to approval by the Boards of Privatisation Commission and PSM or the price of land would be determined after the latest valuation of land by PSM BoD which would be fixed for three years and thereafter evaluated on the basis of an increase @ 10 per cent per annum till the end of the CPEC project ( 2030).
In the light of the letter written by the MoI&P, the committee brain stormed and deliberated on the price, cash flow, price escalation mechanism and terms and conditions. In this regard the earlier agreement with NIP was also examined.
The committee also discussed two options given by Secretary MoI&P in his letter of March 8, 2018 and noted the average returns on different asset classes over a period of 17 years since 2001. The committee observed that the PSM board had already given approval in principle to earmark 1500 acres of land for CPEC related SEZ.
The committee after threadbare deliberations proposed the following options for consideration of the Board of Investment (BoI) and the Ministry of Industries and Production subject to approval of PSM Board: (i) the transaction of land will be on the basis of Government to Government (G to G) basis; (ii) the latest price valuation of Rs 22 million per acre fixed for NIP land (initial price) shall also be the price of the land proposed for CPEC-SEZ. This rate shall be applicable till the date of signing of the agreement or 30th September, whichever is earlier. In case the transaction with BoI or the relevant government entity is not executed by September 30, 2018, the PSM shall have the right to revise the initial price; (iii) the initial price or the revised initial price as the case may be shall be frozen for three years. The price at the commencement of fourth year (after signing of agreement) shall be fixed at 50 per cent above the initial price or the revised initial price as the case may be or the initial price or the revised initial price as the case may be shall be frozen for a period of three years. The price at the commencement of fourth year (after signing the agreement) shall be fixed through valuation to be undertaken by the PSM; (iv) the price of subsequent years (ie) commencement of year 5 and onward shall be increased by 15 per cent annually. For the sake of clarity, the price at the commencement of year 5 shall be 15 per cent above the price fixed through any of the methods discussed the meeting; (v) minimum 35 per cent of the lease money shall be paid to the PSM upfront before the execution of the agreement for transfer of earmarked land; (vi) the lease period for the land shall be 60 years; (vii) the annual ground rent shall be at the same rate as for NIP allottees. The annual revision in ground rent shall be the same as for NIP allottees; (viii) subject to modification in the light of (i) and (vii) and the remaining terms and conditions will be the same as the agreement between PSM and NIP of July 13, 2007; and ( ix) any objections raised by any government, authority or public entity to the lease/transfer of earmarked land shall be addressed/resolved by the federal government.