TCP faces Rs 1.3 billion loss in rice trade

The government''s move aimed at stabilising rice prices in domestic market and protecting growers'' financial interests has cost Trading Corporation of Pakistan (TCP) about Rs 1.3 billion.
Sources told Business Recorder on Friday that in December 2008, TCP issued a multiple series of rice tenders for procurement of Basmati and IRRI-6 from local traders, as prices of commodity were on decline and growers were facing difficulties to get a healthy price because of bumper rice crop in the country.
However, at that time TCP surprisingly procured rice at exorbitant rates (average Rs 84,000 per ton), as prevailing market price for Super Basmati ranged between Rs 55,000 and 57,000 per ton. TCP procured 20,000 tons of Super Basmati of crop 2008-09 at the price of Rs 87,000 per ton, while another lot of 5,000 tons rice of the same variety and same crop year, was later purchased at Rs 75,900 per ton. Sources said that difference between prices of these two lots clearly indicated that TCP procured rice on very high price.
In the past, TCP made two attempts to sale the commodity; however ministry of commerce did not allow the sale of commodity at lower prices. In 2009, TCP tried to export its rice stocks and issued international tenders. However, at that time a conditionalized highest bid of $812 was received, which was not accepted following the ministry''s directives.
In March 2010, TCP again issued two more tenders for the sale of procured rice. The tenders were opened on April 19 and April 20, 2010, for the sale of Super Basmati and IRRI-6. But, only IRRI-6 was sold out, while Basmati tender was scrapped. Finally, TCP recently sold the procured 25,000 tons of Super Basmati at much below prevailing market prices to two bidders and recorded a loss of Rs 1.274 billion in rice trading, which will be claimed from ministry of finance.
TCP had purchased Super Basmati at an average price of Rs 84,780 per ton and total cost of Basmati was about Rs 2.8 billion including interest payment, handling fumigation and storage charges, sources said. While complete stocks of Basmati rice were sold for Rs 1.5 billion at a price of Rs 65,072 per ton, to stabilise the rice prices in domestic market, it has cost about Rs 1.3 billion to the state-run grain trader just in a single deal.
According to details TCP issued tender no. TCP/RICE/2(7)2011 on January 6, 2011 while was opened on February 24, 2011 with ten participants. The highest bid was received at Rs 67,010 per ton, which, according to TCP, was unresponsive.
Therefore TCP did not entertain first bid and sold 2,000 tons to the second highest bidder at Rs 65,072 per ton and remaining entire balance quantity of 23,000 tons was sold to bidder who was at serial No 8 out of total 10 bidders. Sources said that TCP officials also ignored prevailing market rate of Rs 80,000 per ton and did not ask other bidders to improve their bids or even match the highest bid received at Rs 67,010 per ton.
Tender was opened on February 24, 2010 and meeting of price evaluation committee chaired by chairman of TCP, S. Anjum Bashir, was held on February 7, 2010 and negotiations with bidders were not held openly. Bidders from Serial No 2 to 7 were called one by one in a separate room which is also against the norms of healthy competition amongst bidders to improve their bids. Reportedly TCP has sold 23,000 tons Super Basmati rice to same trading group who had supplied rice in 2008 to TCP at abnormally high prices.
"We have made all efforts to sale commodity at highest price and the deal was 100 percent transparent," a high official of TCP said when contacted on the issue. He said that it is not loss and it is like subsidy, as following the directives of federal government corporation intervene in the market to protect the growers.
He informed that Basmati rice was procured in 20018 at a price of Rs 87,000 fixed by the federal government, as at that time prices were on very low level due to record production of rice. The corporation''s timely action helped to stable domestic market and prices of commodity surged just after the TCP''s procurement. Therefore, further procurement was stopped and only 25,000 tons of Basmati was procured, he added.
Now in January this year, tender was floated to sale Basmati rice and some 10 bidder participated, out of which highest bidder offered to purchase 5,000 tons of commodity at Rs 67,080 per ton, however its bids was non responsive, as they were seeking 60 days for the payment and delivery in 90 days. While, as per TCP tender successful bidder was required to deposit bid amount within seven days.
To a finalised and transparent the auction of rice, representative of REAP and FPCCI were also present in the final meeting with bidders. In addition final approval was also obtained from ministry of commerce to sale the rice at Rs 65,072 per ton. Replying a question he said that TCP is unaware about the identity of the companies so he could not confirm that it''s the same party or not which sold rice to TCP in 2008, he said.