ECC set to approve TCP-PSMA sugar deal

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet is all set to approve on Thursday an alleged unfair deal between the Trading Corporation of Pakistan (TCP) and Pakistan Sugar Mills Association (PSMA) for procurement of 185,000 tons sugar at Rs 63 per kg, sources in the Ministry of Industries told Business Recorder.

According to official documents obtained from the Ministry of Industries (MoI), a meeting of the committee, constituted by the ECC of the Cabinet on May 7, 2011, was held on November 21, 2011 in the Finance Division's committee room.

The meeting was co-chaired by Secretary, Ministry of Industries and Finance Secretary. Chairman TCP, a representative from Ministry of Commerce and concerned officials from Ministry of Industries, Ministry of Finance and TCP were also present in the meeting.

TCP Chairman informed the meeting that during the last meeting of the committee held on November 1, 2011 it was recommended that without specifying any reserve price, the committee will decide the reasonability of sale price quoted by sugar mills at the time of award of tender. Thereafter, he said that 32 bidders/sugar mills had participated in the tender. However, 27 bids were declared as responsive. Out of them, six mills quoted the lowest rate of Rs 65,000 per metric ton for total quantity of 48,000 tons, and two mills quoted 2nd lowest rate of Rs 65,100 PMT for total quantity of 15,000 MT. Two mills had quoted the 3rd lowest rate of Rs 65,200 PMT for total quantity of 20,000 MT. Total quantity offered by 27 responsive bidders came to 175,000 MT.

TCP Chairman further informed the committee that sugar price in the market is presently on declining trend. However, the price of imported sugar was about at Rs 91 per kg during the middle of November 2011. He also informed the committee that in view of declining trend of the price of local sugar in the market, PSMA had voluntarily offered to reduce the quoted lowest sale price from Rs.65,000 PMT to Rs.63,000 PMT.

TCP Chairman, further informed the committee that Kashmir Sugar Mills had declined to participate in the tender because it was declared as defaulter in the past. However, before floating the tender for purchase of sugar, Kashmir Sugar Mills (KSM) had cleared its outstanding TCP dues. Kashmir Sugar Mills had offered the sale of 10,000 MT sugar on plain paper due to the reason that it was not issued tender documents by the TCP. TCP Chairman also informed that certain corrigendum/amendments in the tender documents had been issued in view of observations made by the PSMA and in consultation with the members of the committee.

After detailed deliberations on the issues/matters brought out by the TCP in the meeting, the committee made following recommendations for consideration of the ECC: (i) the reduced offer of Rs 63,000 PMT by PSMA is reasonable and may be accepted; (ii) in order to finalise the price and quantity to be offered to the responsive bidders, TCP may approach the bidders for extension in validity period of their bids for an appropriate period; (iii) the offer made by Kashmir Sugar Mills may be treated as a bona fide one, subject to its admissibility otherwise, as it had cleared TCP dues well before the present tender; (iv) the following amendments in the tender documents made by the TCP are endorsed/ supported:

(a) Payment Plan: Payment plan under a ratio of 80:20 replaced by 95:05.

b) Packing and Marking: requirement of inner polythene lining in the polypropylene bag of sugar removed.

c) Certificate by the Cane Commissioner: The clause of the tender containing condition of obtaining the certificate from Cane Commissioner for release of balance payment deleted.

Ministry of Industries has been directed to move a summary for the ECC on the issue of procurement of sugar from the local sugar mills based upon the recommendations of the committee.

"The deal is not transparent as it does not follow the PPRA Rules. The deal will cause about Rs 2.5 billion to the national exchequer because the contracted rate is  Rs 63 per kg higher as  compared to the prevalent rates in the local market," said a source in the Ministry.