Clearance for procurement of 75 Chinese locomotives: Prime Minister rejects entire cabinet's proposal

Prime Minister Raja Pervez Ashraf has rejected the entire cabinet's proposal on clearance of a doubtful deal for procurement of 75 Chinese diesel locomotives in haste, despite Railways Ministry's claim that the PR is losing billions of rupees due to undue delay in approval, according to official documents available with Business Recorder.
Presiding over federal cabinet meeting on November 28, 2012, the Prime Minister also raised few queries over the Chinese company and previous deal of faulty railways engines. "Even if it is not a matter of corruption, we need to justify in front of the public as to why we are going ahead with this deal," he added.
Official documents showed that the deal was approved by the Executive Committee of National Economic Council (Ecnec) in its meeting held on December 14, 2005 at a cost of Rs 12.7 billion. Contract agreement of $105.143 million was signed between the government and M/s Dongfang Electric Corporation, China on December 31, 2008. Down payment of $15.771 million comprising 15 percent of the contract amount was released to the firm in June 2009. Buyer's loan agreement was signed with Export-Import Bank of China on December 14, 2009 and $10.801 million was transferred to China Exim Bank and Sinosure in March 2010.
Minister for Interior Rehman Malik who had headed the committee constituted to investigate the alleged corruption in the procurement of 75 locomotives, categorically stated that no corruption was found by the FIA. It was also pointed out that single source procurement; where there is no competition should not be subjected to PPRA rules. The PPRA rules only apply to competitive biddings for two or more parties. The minister for education and training informed that he was also member of committee.
He said that in previous deal in 2003, 69 locomotives were purchased from the same company out of which 54 were found non operational. He questioned as to why then the concerned ministry and officials went ahead with the current purchase of 75 locomotives. He pointed out that the technical committee had not endorsed the purchase while only the bidding committee had done so. He stated that although China Pakistan relations were sensitive yet there was no compulsion to buy second rate material from them. The minister for education and training was of the view that his observations were largely ignored by the chairman of the committee.
The PM asked the secretary railways whether it is the same company from which the previous purchase of 54 non operational locomotives was made. The secretary railways replied in affirmative that at that time Pakistan was under sanctions and there was no other viable offer. The PM again asked whether these new locomotives would have the same drawbacks that the old one did. The secretary pointed out that the inherent defects had been removed and these 75 locomotives are the improved version. He also stated that there were only 8 nominal deviations of the PPRA rules.
The prime minister stated, "even if it is not a matter of corruption, we need to justify in front of the public as to why we are going ahead with this deal. To this query Minister of Interior replied that regular maintenance of the previous locomotives was the main issue, otherwise qualitatively they were sound. The MG PPRA endorsed the view that there was only minor deviations in the procedure for the procurement . However, the same required condonation of the federal government nfor which the summary has been forwarded.
The other member expressed their views by stating there were only minor in the procedure for the procurement . However the same required conodnation of the federal government for which the summary has been moved. The other members expressed their views by stating that the responsibilities should be fixed on whoever violated the procedure but approval should be given as substantial amount of public money has already been paid.
"If no decision is taken on this summary, foreign exchange will be lost as Pakistan is already paying substantial amount daily. By endorsing the deal with the Chinese company a message will also be given to the international company, that foreign investment in Pakistan is safe," the added. The minister for railways also desired approval of the procurement and condonation of the violation of PPR rules by stating that purchases has been delayed for about 8 years which has caused loss of valuable money and the induction of these 75 locomotives will beef up the strength of railways. The cabinet considered the summary and advised railways to seek views from minister for finance and laws and justice and resubmit the summary in the next cabinet meeting.