Inconsistent standards: AGP raises hackles over Karachi land deal

Says CAA should have leased land to a single bidder in 2007, but blames them for doing so in 2010.

ISLAMABAD: The auditor general of Pakistan (AGP) has raised hackles over the improper leasing of land near Karachi airport by Civil Aviation Authority (CAA) officials. As a consequence, the AGP contends, taxpayers have suffered an estimated loss of Rs123 million.

The alleged loss stems from a 2007 decision to lease out some land close to Karachi airport to a private sector player to build a compressed natural gas (CNG) and petrol station. According to the Auditor General of Pakistan’s office, the government failed to award the contract to the highest bidder and ended up leasing out the land in 2010 to a lower bidder, who in turn has yet to develop the land in accordance with their contract with the CAA.



On February 12, 2007, the CAA advertised that it would be leasing out 1,600 square yards of land for a CNG/petrol station at a reserve price of Rs15,000 per square yard. The CAA received just one bid for that tender, an unnamed bidder who offered Rs50,788 per square yard. While the bidder offered significantly more than the reserve price, and faced no other challengers, they failed to put up the required amount in a security deposit. But rather than contact the bidder to ask them to put up the necessary amount of money, the CAA cancelled the tender.

A year and a half later, the CAA tried again, this time putting out a tender advertisement on November 29, 2008, with a higher reserve price of Rs30,000 per square yard. However, this period was the very depth of an economic and financial crisis and so, unsurprisingly, the CAA received no bids for the contract.

In January 2010, the CAA tried for a third time, this time with a reserve price of Rs35,000 per square yard. The CAA received just one bid once again, this time for Rs36,000 per square yard, and with an additional caveat that the bidder did not want the whole piece of land, but only 1,000 out of the 1,600 square yards put up for the bid. This time, the CAA accepted the bid.

The auditor general’s office, appears to be applying an inconsistent standard in alleging that the CAA engaged in inappropriate activity. On one hand, they allege that the CAA should have contacted the single bidder in 2007 to put up the required amount of security deposit. At the same time, however, they argue that when the CAA did give out the contract in 2010, this time to a different bidder and at a lower price, that they did so illegally and should have cancelled the bid.

At the heart of the AGP’s objection appears to be their inability to comprehend the fact that 2007 real estate prices were unsustainably frothy and that, post crisis, the CAA was unlikely to get similar bids for its land, particularly for a CNG station in the midst of gas load shedding.

The CAA acknowledges that they did not contact the 2007 bidder, but maintained that they did nothing wrong under government rules. The bidder did not put up the required security deposit and hence they scrapped the deal, they say. The Departmental Accounts Committee of the government has ordered an inquiry into this supposed wrongdoing on November 28 and 29, and granted three months to determine who was responsible. The CAA has yet to comply with that request.

Published in The Express Tribune, March 30^th, 2015.