Saudi assistance: ECC questions commission for Urea trade

For Saudi aid to come through, the govt will pay $0.25m as ‘LC opening charges’ to a consortium of banks.

ISLAMABAD:

Members of the Economic Coordination Committee (ECC) have questioned the payment of a commission to a consortium of banks for opening a Letter of Credit (LC) against a Saudi Arabian bank’s loan facility, The Express Tribune has learnt.

A commission worth $0.25 million is to be paid as LC opening charges to import Urea fertiliser after Pakistan sent a SOS to Riyadh last month, fearing massive shortage of commodities ahead of the wheat harvesting season.

The ECC sounded an alarm in its March 16 meeting and three federal ministries, involved in the process, have been summoned for an explanation at the next meeting.

Although former finance secretary Salman Siddique and Trading Corporation of Pakistan (TCP) Chairperson Anjum Bashir explained the process in the meeting, the ECC asked the finance ministry to give a comprehensive presentation in the next meeting on the process and procedure of opening LCs, role of the banking consortium and the commission paid to these banks. The ECC directed that the presentation would be made jointly by the ministries of finance, commerce and industries.

ECC members were told that Saudi Arabia, through the Saudi Basic Industries Corporation (SBIC), had provided a 100-million-dollar loan when Pakistan requested for immediate supply of urea fertiliser as the country was facing a shortage and Urea was needed to enhance wheat crop production.

The ECC had to rush the economic affairs division secretary to seek a Saudi loan after the meeting was told that during the last two months alone, fertiliser importers and dealers had created a huge shortage in the market. Wheat farmers were made to pay an additional Rs28 billion within 60 days but forced to buy the commodity from the black market.

When the ECC was provided a report on the loan’s availability and the subsequent Urea import through the TCP, ECC Chairperson Dr Hafeez Sheikh asked about the process of opening a LC and the commission being paid by the Pakistani government. He was said to have expressed surprise when told the amount being paid as LC opening charges. Upon a question, he was told that a consortium of six banks was authorised to open the LC. But, Sheikh was not satisfied with the verbal explanation.

Bashir told The Express Tribune that the issue was raised in the ECC meeting and said that he had explained the entire process of paying commissions to bank for opening LCs under a government policy approved in 2008. He said that Pakistan might not use the full 100-million-dollar Saudi loan, in which case the commission paid to banks might also be reduced. He said that vessels carrying fertiliser might reach Pakistan in a day or two.

However, he refused to answer when asked why Finance Minister Dr Abdul Hafeez Sheikh was not satisfied when Bashir had explained the process fully as per government policy.

Published in The Express Tribune, March 25^th, 2011.