Land to be transferred to PQA: winding up of Textile City begins amid Sindh government's reservations

The federal government has formally initiated winding up of Pakistan Textile City Limited (PTCL) and the land of the company along with all the liabilities will be transferred to Port Qasim Authority (PQA), it is learnt.
However, Sindh Chief Minister Syed Murad Ali Shah has stated that he will never allow the federal government to wind up the Textile City project from Port Qasim.
This project is the most important in terms of employment and Sindh's economy, he stated recently.
Pakistan Peoples Party Parliamentarians (PPPP) Senator Taj Haider told Business Recorder that the provincial government is the owner of the land as per the Constitution and it would raise objection if the land is transferred to the PQA.
Official sources said that as per requirement of the Securities & Exchange Commission of Pakistan (SECP), the winding up process, including audit, has been initiated.
According to the documents available with the Business Recorder, a committee under the chairmanship of Barrister Zafarullah Khan, Special Assistant to the Prime Minister on Law, was formed to furnish recommendations about the winding up of the company.
Subsequent to the Prime Minister's decision of winding up the company, a meeting of the said committee held under the chairmanship of Barrister Zafarullah Khan had decided that as per the PM's directives, the board of directors of the company must proceed with the voluntary winding up of the company in accordance with the procedure laid down in the company's articles of association.
The land of the company along with all the liabilities shall be, simultaneously, transferred to its original owner ie PQA. Moreover, Economic Coordination Committee of the Cabinet (ECC) has given approval for Rs12 million to be released under the head of immediate liabilities and the case is under process in the Finance Division.
The PTCL, a development project under Public Sector Development Programme, was aimed at creating an exclusive industrial zone that specialises in large-scale production of value added textile products, besides creating an estimated 80,000 jobs. The PTCL had an initial paid-up capital of Rs1,250m with 40 per cent shares of the federal government, 16 per cent shares of Sindh government, eight per cent each of PQA and National Bank of Pakistan, whereas 28 per cent of various financial institutions.
In 2007, the company acquired 1,250 acres of land on a 50-year lease from PQA for Rs993m. The entire equity amount was consumed in purchasing the land and the company had to follow a debt model for the development work.
For the purpose of development work, the company entered into an agreement with the NBP against the sovereign guarantee of the GoP and the land was mortgaged with the bank. The NBP financing are as: total credit limit, Rs3,165m; total utilised, Rs2,405m, (this includes Rs930m paid mark-up), net Rs1,475m; (most of which spent before 2013) and the accrued mark-up not yet paid amounted to Rs466m.
The development work carried out included levelling and grading of land (1,250 acres - Rs559m); water works package (Rs410m); priority road works (Rs148m); electrical works KESC - 5-km (Rs42m); Nespak-professional fees (Rs63m); others, Rs30m, thereby totalling the amount to Rs1,252m.
Despite repeated requests made to the concerned authorities, the project could not take off due to non-provision of basic infrastructure like gas, industrial water and electricity.
The company now owes a debt of Rs2.4 billion to NBP. On the daily basis, the payable mark-up is Rs700,000 approximately.
The company also needed approximately Rs12m for immediate short-term liabilities, including salaries of the skeleton staff with which the company has been working and which has not been paid since May 2016.
Due to non-payment of the first principal instalment, the company's accounts were blocked by the NBP on August 1, 2015 and remain so to-date.
In view of these challenges, the company in its board meeting held in January 2014 decided to sell off 200 acres of land to K-Electric for establishing a coal-fired power plant. However, the terms of lease of the company forbid sale of the land to a third party.
Therefore, a summary was submitted to the Prime Minister for approval of this decision. In response to this request, Finance Division instead conveyed the in-principal approval of Prime Minister for winding up of the company and transfer of the land to its original owner ie PQA, along with transfer of all its liabilities.