Procurement of Chinese locomotives: Nadeem finds violation of PPRA rules

MUSHTAQ GHUMMAN

ISLAMABAD: Deputy Chairman Planning Commission Dr Nadeem-ul-Haq Monday did not rule out corruption in procurement of 75 Chinese locomotives but found only violations of the PPRA Rules.

National Accountability Bureau (NAB) has arrested Pakistan Railways General Manager Saeed Akhtar for his alleged involvement in billions of rupees of corruption after the Supreme Court of Pakistan directed that corrupt official should be arrested.

Prime Minister Syed Yousuf Raza Gilani has also directed the committee on ‘grant of condonation of deviation/departure of PPRA Rules 2004 in the procurement of 75 locomotives’ constituted under the chairmanship Minister for Interior, Rehman Malik, to present its report in the next cabinet meeting.

“We had discussed the issue in detail and pointed out violations of the PPRA Rules in the procurement process and advised that Pakistan Railways may get condonation from the President or the Prime Minister who are competent authorities,” said Dr Nadeem-ul-Haq while talking to Business Recorder from Lahore.

“Perhaps there is corruption in the deal but we found nothing except violation of PPRA Rules and if somebody is suspicious about me, he must pinpoint any specific wrongdoing I did in this case,” Dr Nadeem-ul0Haq stated.

Two months ago, Cabinet refused to condone violations of PPRA Rules 2004, committed by the Ministry of Railways in procurement of 75 locomotives and constituted a committee under the chairmanship of Interior Minister Rehman Malik with other members being Minister for Inter Provincial Co-ordination, Minister for Kashmir Affairs, Minister for Railways and Minister of State for Human Resource Development. The committee was assigned the task to look into the matter and report back to the Cabinet.

 One member of the committee Sheikh Waqas Akram, Minister of State for Human Resource Development, recently pointed out that 68 locomotives earlier procured from the same company were not manufactured in accordance with Pakistan’s railway tracks.    

Sheikh Waqas Akram maintained that the three-member committee headed by the Deputy Chairman Planning Commission was not a technical committee which can identify if there is a minor or major violation. According to him, Secretary Establishment observed that the Cabinet cannot condone PPRA Rules violations.

Waqas Akham accused Kashif Murtaza and Sami Khilji of the involvement in this scam.

The PPRA board comprising several Federal Secretaries also considered the case and rejected it with an overwhelming majority with only one Secretary favouring the deal.

“Khilji has provided a paper to FIA which states that the project was approved on the personal intervention of Railways Minister,” he continued. 

According to documents, the Cabinet was informed that the procurement of 75 locomotives was approved by the Executive Committee of National Economic Council (Ecnec) in its meeting held on Dec 14, 2005, at a cost of Rs 12.7 billion with a foreign exchange component of Rs 8.4 billion.

A contract agreement of $105.143 million was signed between Pakistan and M/s Dongfang Electric Corporation, China on December 31, 2008.

The National Assembly Standing Committee on Railways referred to certain procedural flaws, a deviation from PPRA Rules 2004, rectification of which requires exemption by the competent authority.

On the advice of the Law, Justice and Parliamentary Affairs Division, the PPRA was requested by the Ministry of Railways to seek necessary exemption of the PPRA rules.

The PPRA has revealed that the authority has not been entrusted with the necessary powers to condone violations of Public Procurement Rules 2004.

A committee under the Chairmanship of Deputy Chairman, Planning Commission with the terms of reference to look into the allegations with regard to the procurement of locomotives, recommended condonation of deviations/departures from PPRA Rules by the federal government to avoid further delay in procurement of the locomotives which is detrimental to Pakistan Railways’ interest in the prevailing uncertain situation.

The Ministry of Railways maintained that an acute shortage of locomotives persists which has stalled the freight sector and resulted in the suspension of main line passenger train linkages, causing extensive loss of revenue.

As many as 50 locomotives are to be assembled at locomotive factory, Risalpur, and delay in the finalisation of transaction has resulted in idling of the factory.

Besides, delay in opening of Letter of Credit (LC) is causing a recurring financial loss of Rs 125,000 per day, as obligatory payments comprising commitment charges.

On the advice of the Prime Minister, the case for condonation of PPRA Rules was placed before the ECC in its meeting held on Jan 3, 2012.

The ECC observed that the authority to condone violations/deviation of procurement rules/regulations vests in the federal government and advised to place the matter before the Cabinet.

According to the Ministry of Railways, a down payment of $15.771 million, comprising 15% of contract amount, was released to the firm in June 2009.

Buyer’s loan agreement was signed with Exim Bank of China on December 14, 2009 and an amount of $10.801 million was transferred to the bank and Sinosure in March 2010. However, an LC has not been established.

During the process, the National Assembly Standing Committee on Railways found out certain procedural flaws and directed for their condonation by the competent body /authority.

The matter was accordingly submitted to the Prime Minister, who directed for its placement before the ECC.

When the summary was submitted to the Cabinet Division, it opined: ( i) section 21 of the Public Procurement Regulatory Authority Ordinance 2002 empowers the Federal Government to grant exemption from operation of the said ordinance or any rule or regulation made thereunder or any other law regulating public procurement on recommendations of the Public Procurement Regulatory Authority (PPRA).  Simultaneously, PPRA is required to record reasons in writing for its recommendations; (ii) powers of the federal government are not unlimited. These are contingent upon recommendations of the PPRA; (iii) the case under consideration is not a case of exemption, but of condonation of violations already committed; (iv) the Board of PPRA, in its meeting on February 12, 2008, concluded that the management of PPRA can only recommend case ex-post facto approvals; (v) in terms of Article 90(1) of the Constitution, the federal government means and consists of the Prime Minister and Federal Ministers; (vi) ECC of the Cabinet is not competent to condone the violation of Public Procurement Rules 2004; and (vii) section 21 of PPRA Ordinance 2002 does not empower the federal government or any other authority to condone the violations of regulations.