Trading Corporation of Pakistan - the case for market intervention

Trading Corporation of Pakistan (TCP), a private limited company, was established in 1967 as a premier trading house. Initially, TCP had the role to engage in international commodity exchange. With time, the role evolved in line with the government's free market approach and today it engages mainly in cash trade.
At the end of the day, TCP aims to provide subsidised essential commodities to the general public as well as to ensure strategic reserves to prevent shortages. It intervenes in the market as directed by the government to hedge against any abnormal price hike and works to ensure a fair price to farmers for their agricultural products. In addition, with the closure of Cotton Export Corporation (CEC) and the Rice Export Corporation of Pakistan (RECP), their functions have been merged into TCP, thus greatly enhancing its role.
Beginning rather modestly with a trade worth around Rs 115.763 million in fiscal year 1967/68, TCP registered a turnover of Rs 45.16 billion and booked after - tax profits worth Rs 1.63 billion in fiscal year 2009/10. As a matter of fact, booking profits even in these recessionary times is an achievement of TCP which has emerged among the select profit-making, efficient and professionally run state enterprises.
TCP derives its operational mandate squarely from the Federal Government. Following a decision, usually taken by the Economic Co-ordination Committee (ECC) of the Cabinet, TCP undertakes the import/procurement and sale process. Public tenders are issued in line with the Public Procurement Rules of 2004. Only pre-qualified bidders are allowed to participate in the tender. The process of pre-qualification, however, remains open at all times. TCP has a well designed system in place for the process from bid evaluation to the final award of the contract. Three independent committees, each with at least three senior officials as members, including representatives of the Ministries of Finance, Commerce and Food & Agriculture, are constituted to ensure compliance with tender terms.
While compliance with PPRA rules is pivotal to all TCP procurements, in order to ensure utmost transparency, representatives of Transparency International Pakistan, Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and Pakistan Sugar Mills Association (PSMA) are invited as observers at the time of tender award. To stave off the possibility of non-performance by bidders, TCP has increased the amount of bid bond and performance guarantee. On the other hand, TCP is striving to prevent cartelization in the various services it generally procures in the process of import like shipping and customs clearing, stevedoring and transportation, etc.
To ensure quality, shipment is allowed only after the cargo has been duly inspected and cleared by an International Pre-Shipment Inspection Agency appointed by TCP. On arrival, the goods are again inspected by Pakistan Standards and Quality Control Authority (PSQCA) for quality certification.
The goods are finally delivered to provinces, Utility Stores Corporation (USC), Canteen Stores Department (CSD), and National Fertiliser Marketing Company Limited (NFML) as per government directives. TCP has substantially improved its delivery service and can now manage day-and-night operations in which 5,000 to 15,000 Metric Tons can be supplied on daily basis directly from the port.
On ECC directives, TCP made arrangements for the import of 1.2 Million Metric Tons sugar in 2010 through international tenders. In all the cases, tenders were awarded to the lowest bidders at rates that were internationally Competitive. TCP's sugar operation provides a classic example of successful market intervention by the government.
Lifting of stocks by provinces produced immediate results. The price of sugar which had been escalating for quite some time in 2010, registered the highest increase when, on November 05, 2010, the retail prices skyrocketed to Rs 108/kg. However, with TCP's timely intervention, the price declined within a week to Rs 74/kg on November 12, 2010.
On the directives of ECC, TCP imported a total of 810,493 metric tons (MT) urea in fiscal 2009/10. Of that, a quantity of 313,312 Metric Tons was imported from SABIC, Saudi Arabia against a credit facility of $100 million provided by Saudi Fund for Development (SFD). It was delivered to NFML for sale through its network. The remaining 0.5 million metric tons of urea was imported against five international tenders and delivered to NFML. This year for Rabi Crop, TCP has imported 0.225 Million Metric Tons of urea as per ECC directives of 2nd February 2011. The SFD's credit facility of US $100 million was utilised for import of around 1, 25,000 Metric Tons from SABIC, while the remaining 100,000 Metric Tons was procured through international tenders.
In addition to performing its normal trading task, the TCP has been instrumental in making Gwadar Port Terminal operative, that remains important for the progress and development of Balochistan province. The import of certain commodities through Gwadar Port has not only generated economic activity in that area but has also helped in generating employment for the locals in line with Prime Minister's package of Aghaz-e-Haqooq-e-Balochistan.
The recent import of urea from SABIC was also routed through Gwadar. As an important institution of the federal government, the TCP remains committed to contribute for a prosperous future of the country and looks forward to playing an affective role as a market stabiliser.