ECC to revisit Engro terminal lease on objections

Qaiser Sheikh terms 30-year extension without bidding illegal; cabinet referred matter back

ISLAMABAD:

Investment Minister Qaiser Sheikh has termed a 30-year lease extension for the Engro VoPak Terminal a violation of public procurement rules and said it would damage the promotion of petrochemical industries, in a move that could result in a review of the decision by the cabinet.

In a letter to the chairman of the Economic Coordination Committee (ECC) of the cabinet, Sheikh also registered a protest over not "recording" his views against the ECC's decision to grant a 30-year lease extension without competitive bidding. "I have written a letter, and the matter will be taken up today (Tuesday) by the ECC," Sheikh told The Express Tribune. He added that the federal cabinet had referred the matter back to the ECC after his objections.

The development surfaces days before the expiry of the current 30-year period, which ends this Thursday. The Port Qasim Authority had signed a build-operate-transfer (BOT) deal with Engro Vopak Terminal Limited (EVTL) in 1996.

The ECC on June 5 approved the 30-year extension as an additional agenda item, which triggered a reaction from within the cabinet. "The ECC further considered a summary submitted by the Ministry of Maritime Affairs regarding operational continuity of EVTL and approved it," according to a statement issued by the finance ministry 10 days ago.

"My views and comments placed before the ECC meeting held in respect of additional agenda item extension of EVTL Implementation Agreement are not recorded in the subject minutes," stated the investment minister in a correspondence with ECC Chairman and Finance Minister Muhammad Aurangzeb.

The Cabinet Division, which is responsible for keeping records of all cabinet bodies and holding their meetings, did not respond to requests for comment as to why the minister's strong objections were not made part of the ECC minutes.

Sheikh stated that "the unsolicited proposal (of EVTL) fails to meet the threshold of unique and innovative under Rule 2(1)(ka) and Rule 37-A of the PPRA Rules, 2004". He further said that the extension was "against rules and this will create monopoly and damage to the promotion of petrochemical industries in the country". This extension for a further 30 years without competitive bidding is opposed and unacceptable, Sheikh stated.

The investment minister also said that the Public Procurement Regulatory Authority (PPRA) rules and an in-house assessment committee have categorically held that the EVTL proposal does not qualify under the said provisions.

"The subsequent reopening of negotiations through amendments to Article 3.26 of the Implementation Agreement and Article 3.13 of the Supplemental Implementation Agreement under Article 18.1 of the Implementation Agreement constitutes a circumvention of open competitive bidding, thereby conferring an undue advantage upon the incumbent concessionaire through the grant of a further 30-year term," said Sheikh. Government officials said that there was a possibility that the ECC's approval might be reconsidered in light of the objections raised by the investment minister. With the cabinet having referred the matter back to the ECC, that reconsideration is now scheduled for Tuesday. The secretary of the Cabinet Division did not respond to a question whether the matter would again be placed before the ECC after the strong objections raised by Sheikh.

The EVTL terminal handles over 60% of Pakistan's bulk chemical imports and approximately 55% of its marine liquefied petroleum gas (LPG) imports. Additionally, its operations are credited with saving the national exchequer millions of dollars annually by facilitating downstream petrochemical investments.

The ECC was informed early this month that, as per the original agreement, negotiations for any further extension in the lease had to be started 10 years before the expiry of the first 30-year deal. The cabinet body was further informed that the PQA did start the negotiations but could not reach a consensus, and these discussions remained inconclusive. The PQA Board resolved in 2021 that negotiations were over and no extension could be granted.

The board further directed the initiation of a competitive process through the hiring of a consultant in line with public procurement rules. The official record showed that the company submitted an unsolicited proposal (USP) in 2022, but the PQA in-house committee concluded that EVTL's proposal was "not unique and innovative; thus, it does not fall within rule 37(A) of the Public Procurement Rules, 2004".

The investment minister has now reiterated the same position in his correspondence.

Subsequently, the government decided to hold a second round of negotiations with the company and also decided that the bidding process should continue concurrently. As a result, the PQA board approved amendments to the implementation agreements. Afterwards, both parties agreed on a proposal to extend the agreement for a further 30 years with certain conditions. The PQA board has already approved the 30-year extension, which was also stamped by the ECC early this month.