Commission to banks by TCP on LCs opening: ECC raises eyebrows over percentage

The Economic Co-ordination Committee (ECC) of the cabinet has reportedly raised eyebrows over the percentage of commission being given by the Trading Corporation of Pakistan (TCP) to six banks on opening of Letters of Credit (LCs), well-informed sources in Industries Ministry told Business Recorder.
Chairman TCP, S. Anjum Bashir, informed the ECC in its last meeting that $0.25 million had been given to banks for import of urea through open tenders and Saudi Arabia under Saudi Basic Industries Corporation (SABIC) facility.
TCP revealed that 100,000 MT urea imported through open tender had arrived while 130,000 MT through SABIC would arrive between March 19-29, 2011.
It was also revealed that TCP had made a reference to Economic Affairs Division (EAD) stating that Saudi Fund Development (SFD) credit facility of $100 million caters for approximately 250,000 metric tons of urea from SABIC. As per the ECC decision, the import from SABIC was restricted to 125,000 MT, accordingly as 100,000 MT was imported through tender by the TCP.
EAD apprised the ECC that SABIC was asked to freeze the LC for the unutilised balance amount. However, SABIC said that it would keep the LC intact, as SFD had already given an undertaking for the full contracted amount. Adjustment in the schedule for the subsequent shipments has also been assured by them.
The sources said Chairman ECC, Dr. Abdul Hafeez Shaikh inquired about the process and procedure of opening of LCs. It was stated that a consortium of six banks was authorised to open LCs and they were charging 0.25 per cent commission of the value of LC, which in the instant case comes to $0.25 million.
Regarding decision on price differential in import price and sale including incidental charges to be picked up by the Finance Division, it was stated that there was a standard procedure for making these payments.
Ministry of Ports and Shipping revealed to the ECC that a summary on the cost differential in respect of handling/transportation from Gwadar and Karachi had been prepared and circulated to concerned Ministries ie. Ministries of Finance, Commerce and Industries & Production (MoI&P) for their views/comments. After receiving their views/comments, the summary would be submitted to ECC, it was added.
Ministry of Communications informed the ECC that Rs50-60 billion would be needed to complete Gwadar-Rato Dero road. There was an opinion that Gwadar Port couldn''t be made fully operational untiland unless the road was completed by NHA.
After detailed discussion, the ECC directed Ministry of Finance to give a comprehensive presentation on the process/ procedure on the opening of LCs and role of the banking consortium and commission paid thereof in consultation with the MoI&P and Chairman TCP.
Ministry of Ports and Shipping was directed to ensure submission of summary on cost differential in respect of handling /transportation charges from Gwadar and Karachi in the next meeting of ECC.
Deputy Chairman, Planning Commission was directed to hold a meeting with Secretary, Ministry of Communications and relevant stakeholders to arrange adequate funds for the construction of Gwadar-Rato Dero Road on fast track basis. A report in this regard would also be submitted to the Cabinet Division on priority basis.