Inquiry names FBR officials in Rs25b faulty T&T contract

PM orders action against former project director, two former FBR chairmen

Shahbaz Rana May 08, 2024
The FBR has audited the company’s withholding tax deductions in the past. However, it is the first time that the FBR has decided to open the company’s books to see the complete details. Photo: REUTERS


An inquiry committee has attributed the failure and flawed awarding of a Rs25 billion contract, aimed at monitoring the production activities of companies three years ago, to the project director and two former chairmen of the Federal Board of Revenue (FBR).

Chaired by Secretary Finance Imdad Ullah Bosal, the committee presented its findings to Prime Minister Shehbaz Sharif on Tuesday. The PM promptly directed actions against the then-project director Tariq Hussain Sheikh and the then-member operations Dr Mohammad Ashfaq, holding them directly responsible for the lapses in the 2021 award of the track and trace project.

Former FBR chairman Javed Ghani was found negligent in overseeing the multibillion rupees deal for a period of five years. Dr Ashfaq later became chairman FBR and had been sidelined for the past two years due to his involvement in the Chief Justice Qazi Faiz Isa offshore asset case.

The Track & Trace system initiative aimed at combating tax evasion was deemed a significant fraud against the nation and economy.

PM Sharif commended the report by the finance secretary.

The inquiry report also attributed responsibility to two other member operations for their failure to timely constitute the project management board to oversee and resolve disputes during project implementation.

Former member operations Qaiser Iqbal and former member operations, now Chairman FBR, Amjad Zubair Tiwana were held accountable for the delay in forming the board. However, no action was recommended against them.

This marked the fourth inquiry initiated by PM Sharif into the Rs25 billion track and trace contract, awarded by the Pakistan Tehreek-e-Insaaf (PTI) government. Former governor of the State Bank of Pakistan (SBP), Tariq Bajwa, led a prior fact-finding inquiry but found no evidence of malpractice in the contract award.

The Bosal committee was tasked with identifying those responsible for the flawed award and execution of the track and trace project. Initially introduced in 2019 to combat tax evasion, the track and trace system was first implemented in the cigarette industry before expanding to other sectors such as fertilisers and sugar.

The fact-finding committee led by Tariq Bajwa attributed delays and poor implementation of the track and trace project to the FBR, the contractor, and manufacturers. However, it did not uncover any evidence of wrongdoing in the contract award.

PM Sharif instructed on Tuesday to renegotiate the deal with the contractor to include provisions related to dispute resolution and third-party audit, according to a statement issued by the PM’s Office.

The PTI government had awarded the estimated Rs25 billion contract to a consortium consisting of M/s AJCL, MITAS, and Authentix, but the system largely remained non-functional. While operational in the tobacco and fertiliser sectors, the track and trace system faced challenges in the sugar and cement sectors.

The consortium led by AJCL won the contract based on the highest technical score, despite its financial bid being 52% higher than the lowest bid. The price difference between the lowest financial bid of Rs499 per thousand stamps and the second highest bid offered by the consortium of AJCL Private Limited was Rs259 per thousand stamps.

This resulted in an additional payment of Rs8.5 billion to the bidder over the five-year contract period. The total estimated five-year contract value was Rs25 billion. The five-year contract can be extended by another three years, taking the total additional financial impact to Rs13.5 billion.

The contract is set to expire in 2026, and the PM instructed the finance minister to finalise a new way forward based on the Bosal committee report.

The PM has already sidelined 25 compromised officers of the FBR. The board on Tuesday removed the chief commissioner of Quetta Regional Tax Office and placed him in the administration pool like 25 other officers.

Published in The Express Tribune, May 8th, 2024.

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