Pak American Fertiliser: Audit detects irregularities in privatisation deal

AGP says bidders not provided opportunity to take part in open auction

ISLAMABAD:

The Auditor General of Pakistan (AGP) has unearthed irregularities in the multi-billion-rupee sale deal of Pak American Fertiliser Limited and has called for conducting a probe to fix responsibility on the people involved in the company’s non-transparent privatisation.

In a special audit report for the year 2010-11 presented to the parliament, the AGP observed that the Privatisation Commission opened sealed envelopes in the first round and announced the bid value for the sale of Pak American Fertiliser. The bidders coming up with the highest three bids were invited to make offers in an open auction in the second round.



Earlier, the Privatisation Commission had invited expressions of interest on September 7, 2005 for acquiring 90% shares in Pak American Fertiliser.

In the first round, Ibrahim Fibres submitted the highest bid of Rs19.999 billion, which was approved by the Cabinet Committee on Privatisation (CCOP) on March 11, 2006. A Letter of Acceptance was also issued to the bidder on the same date.

However, Ibrahim Fibres failed to pay the bid price and informed the commission on March 21 of its inability to press ahead with the acquisition of the company on offer.

The CCOP then decided to accept the second highest bid of Rs16.110 billion, filed by Azgard-9, and the Letter of Acceptance was issued on April 3, 2006. The bidder deposited the bid price and took over management control on July 15.



During the scrutiny of documents, the auditors noticed that the Privatisation Commission invited the three highest bidders of the first round for taking part in the second round. However, no bidding took place as the second and third highest bidders did not match the top offer made by Ibrahim Fibres.

The auditors also observed that the Letter of Acceptance was issued to Azgard-9 without providing an opportunity to the bidders selected for the second round to participate in the open auction.

According to the audit report, the third highest bidder – Kohinoor Textile Mills – clearly demonstrated continuous interest in the share purchase and sought equal opportunities through a letter dated March 22, 2006.

The report commented that the process of sale of Pak American Fertiliser was not done in a transparent manner.

In its reply, the Privatisation Commission management said the CCOP approved the proposal on March 31, 2006 and accordingly the offer for sale of shares to Azgard-9 and Jehangir Siddiqui Capital Markets was finalised.

The third highest bidder could only be asked to participate in the second round if Azgard-9 had refused to take part, it said.

However, the AGP termed the management’s reply unsatisfactory, saying it was necessary to provide the same opportunity for both the second and third highest bidders selected for the second round.

It said the offer was made to the second highest bidder only, ignoring the process of the second round and the continuous interest shown by the third highest bidder in the transaction.

Published in The Express Tribune, November 6^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.