Sugar purchase at high rate likely to cause Rs1.8 billion loss
The government plans to purchase 200,000 tons of sugar from the mills by removing all safety valves and at prices that are higher than wholesale market rates, which will cause a dent of Rs1.8 billion to the national exchequer.
Documents available with The Express Tribune reveal that a committee, constituted by the Economic Coordination Committee (ECC) of the cabinet, has not only sought special treatment for a defaulter but has also proposed amendments in tender documents that may favour sugar millers.
The committee is headed by finance secretary and its members include TCP chairman and other key government officials.
The committee, in its November 21 meeting, cleared the proposal to purchase 200,000 tons of sugar at Rs63,000 per ton to maintain strategic reserves. TCP will procure the commodity.
The committee’s recommendations were tabled in an ECC meeting held on December 1. In the meeting, a senior secretary expressed concern over the proposed high price and pointed out that sugar was being sold at Rs54,000 per ton in the wholesale market, forcing ECC to again constitute a committee under the finance secretary to review the price.
However, ECC did not object to removal of safety valves like high advance payment to mills and withdrawal of certificate condition. It also did not oppose the purchase of sugar from a defaulter that had cleared dues just before new tenders were issued.
At Rs54,000 per ton, 200,000 tons of sugar will cost Rs10.8 billion while at the approved rate the cost will shoot up to Rs12.6 billion, an increase of Rs1.8 billion.
The committee, according to the documents tabled in ECC, recommended that “the offer made by Kashmir Sugar Mills may be treated as bona fide, subject to its admissibility otherwise, as it had cleared TCP dues before the present tender.”
TCP had rejected the sugar mill’s offer by stating that the mill was “declared ineligible due to earlier default in 2007-08”. In this fiscal year, TCP had procured sugar and left it with the mill to lift at an appropriate time. However, at the time of sugar shortage in the country, seven mills, including Kashmir, refused to release the commodity despite receiving full payments.
Documents show that “Kashmir Sugar Mills has made offer for 10,000 tons of sugar on a plain paper due to the reason that it was not issued tender documents by TCP.”
Interesting enough, TCP labelled Al-Noor Sugar Mills of Nawabshah as “non-responsive as the party had not purchased tender documents”. Al-Noor offered to supply 10,000 tons through two separate bids.
Changes in tender documents
In the November 21 meeting, the committee also decided to amend tender documents. It changed the payment formula and decided to pay 95 per cent of the amount in advance as against the original plan of 80 per cent in advance and the remaining 20 per cent at the time of lifting the commodity. “It was done to provide more liquidity (to the mills) so that farmers can be paid,” argued the committee. The committee also scrapped the condition for the mills to obtain certificate from cane commissioners showing whether the millers had made payments to the growers.
Default penalty raised
A TCP spokesman said TCP’s bid evaluation committee had rejected Kashmir Sugar Mills’ bid due to its failure to release the commodity in 2008, but its name was included in the tender on the recommendation of the committee formed by ECC.
Explaining the change in advance payment condition, he said the recommendation was made after TCP raised the default penalty from 25 per cent to 100 per cent. He said final decision on the sugar purchase had not yet been taken as the committee had not sent its recommendations in writing.
Published in The Express Tribune, December 9th, 2011.
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