Imported sugar delivery time uncertain: $30 million government money at risk

Around $30 million of government money is at risk as the delivery time by Sadan General Trading Corporation LLC (SGT), which has been awarded two sugar tenders of 100,000 tons (50,000 tons each), is still not confirmed, official documents and insiders in the Commerce Ministry told Business Recorder.
MV Teal Arrow (IMO No. 8309402, call sign: C6KB8), nominated by SGT, due to load 25,000 tons white sugar from Santos Port, Brazil, on 22 - 25 March 2010, has instead loaded petcoke at Cosipa terminal in Santos, and is proceeding to Dubai, for discharging operation.
On March 6, 2010, National Bank of Pakistan (NBP) established an irrevocable transferable letter of credit (LC) for $30,712,500 favouring SGT, advised through Habib Bank AG Zurich, Moorgate Branch, in London.
As per the tender and L/C terms, SGT was supposed to effect the first shipment within 3 weeks, or latest by March 27, 2010 (excluding voyage time) from the date of opening of L/C. However, after several exchanges between SGT and TCP, the former finally nominated mv Teal Arrow, which has clearly not loaded any bagged sugar for TCP, insiders said.
Additionally, both TCP''s nominated pre-shipment inspection agency, Brazil office of Société Générale de Surveillance SA, Geneva (SGS) and TCP are not aware of any developments and have already presumed that loading has not yet commenced. As per tender terms, on receipt of the L/C from TCP, SGT was to offer sugar stocks, and packing bags, as per shipment schedule prior to shipment/dispatch and also ensure SGS''s accessibility to the stocks for inspection, sampling, testing, etc. This was never done.
Sources said that subsequent to a report, carried by Business Recorder on March, 21, 2010, that the management of TCP finally took a serious view of the matter and directed the concerned division to initiate necessary action against SGT for failing to provide 100,000 tons of sugar purchased by TCP from SGT through two separate tenders. However, no action against SGT has actually been taken until now. Interestingly, with the reported protection of two top TCP officials, SGT has asked for a 10-day extension to complete the loading operations. However, this deadline will expire on April 6, 2010 and it is unlikely that SGT will be able to comply with its contractual obligations within the stipulated delivery period.
The Finance Director''s powers were completely curtailed by outgoing TCP Chairman Saeed Ahmad Khan due to reasons well known to him. However, the former has managed to have his powers reinstated due to his considerable influence in Islamabad.
The Ministry of Commerce has also failed to take any action against TCP Directors who personally ensured that SGT was pre-qualified at the 11th hour. The Commerce Ministry seems least interested to take action against these Directors.
Even though SGT cannot ship by the extended deadline of April 6, 2010, its loyalists continue to make strenuous efforts to grant further shipment extensions to SGT so that default can be avoided. TCP can take strict action against SGT in terms of forfeiture of performance guarantee, damages and cancellation of contract.
The ECC has already directed Commerce Division and TCP to streamline the mechanism and to remain vigilant in floating tenders and examination of bids since some "spoilers" had submitted bids in TCP''s tenders which otherwise did not qualify. The ECC also directed that procurement of sugar should be expedited to facilitate the general public.
London white sugar futures on August-2010 contract settled at $ 453.20 per ton on April 1, 2010 and have sunk over 40 percent since, after reaching a record $ 767 per ton in January 2010. The ECC has already been informed that prices of sugar in international market have declined.