Purchase of 75 locomotives: Zardari's intervention helps Chinese firm win Rs four billion contract

On the intervention of President Asif Ali Zardari, Pakistan Railways has finally awarded contract worth rupees four billion to Chinese state-owned Donfang Electric Corporation (DEC) for the purchase of 75 locomotives, The Business Recorder has learnt. The contract award ceremony was held in Islamabad in the presence of Federal Minister for Railways.
The Pakistan Railways authorities and DEC officials signed the contract. Director of Procurement Nisar Mehmon and Member, Finance, Pakistan Railways, Jehangir Aziz signed the paper, and on the behalf of Chinese company Hoo Weidong, Vice-President of Donfang Electric Corporation (DEC) and Mli Depuo, General Manager Import and Export of Dillian Locomotives of China, signed on the contract documents.
It may be mentioned here that the Chinese company had offered to provide 75 engines at the cost of 107 million dollars as against the US company's tender of 227 million dollars. The cash starved Pakistan Railways had entered into several agreements with Chinese railway companies for its development and modernisation of its outdated system.
In 2001, Pakistan Railways signed a 91.89 million-dollar contract with China National Machinery Import and Export Corp for the manufacture of 175 new high-speed passenger coaches. The project was funded by Exim Bank China on a supplier credit basis.
Under an agreement, signed with China in 2003, Pakistan Railways purchased 69 locomotives of which 15 were delivered as completely built units, while the remaining 54 were built at Pakistan Railways' locomotive factory. The locomotives were purchased on suppliers' credit basis with funding provided by Exim Bank of China through the Dongfang Electric Corporation.
However, the quality of Chinese engines has come under severe criticism. There are circles that claim that the Chinese railway engines are not up to the mark, therefore, Pakistan should not buy additional railway coaches and engines from China.
Nevertheless, a senior Railway official remarked that the coaches and locomotives, provided by China on credit, were being successfully used on Pakistan's mail and express trains from Rawalpindi-Lahore-Karachi, Lahore-Faisalabad and Rawalpindi-Quetta.
He said: "Pakistan Railways is already facing an annual deficit of Rs 42 billion. Therefore, we have to keep in mind the price tag of each locomotive engine. A man, who could afford only a Suzuki car should not dream of a Mercedes or BMW car," he emphasised.
He said the technical and the tender committee had not unduly favoured Dongfang in awarding the contract as it had fulfilled all required technical requirements and standards. Under another project, the Chinese companies are rehabilitating 450 passenger coaches at an estimated cost of Rs 2.14 billion. The project also included the conversion of 40 coaches into air-conditioned cars and the conversion of 10 power vans.
Furthermore, there was a provision of 100 new high-speed bogies, 30 of which were imported from China, while 70 were manufactured locally on a transfer-of-technology basis. It may also be mentioned that President Asif Ali Zardari has intervened to resolve the thorny issue of purchase of 75 locomotives by Pakistan Railways, and directed the government to decide the matter on merit.
Chinese Ambassador Luo Zhaohui met the President at the Aiwan-e-Sadr, and briefed him about pressures on the Pakistan Railways to cancel the 107 million-dollar deal with the Chinese state locomotive manufacturing company, Dongfang (DEC), for the purchase of 75 railway engines.
It is pertinent to recall that Chinese firm was the lowest bidder in the international tender and the Pakistan Railways had accordingly awarded the contract to it in July. The contract document has already been finalised, the Ministry of Law has vetted it and each has been stamped.
Sources said the only reason for the delay in signing was the availability of the Prime Minister of Pakistan to grace the signing ceremony for which reason the Chinese extended the validity of their bid from October 31, 2008 to November 30, 2008. After the President's intervention and directives to the Railways Ministry, Dongfang has further extended the validity of its bid till December 31, 2008.
Contract of 75 locomotives was awarded to Dongfang Electric Company (DEC) on July 31, 2008 subsequently Pakistan Railways confirmed this vide letter issued dated September 22, 2008. The draft contract agreement was finalised on September 29, 2008 and forwarded to the Law Division, government of Pakistan for vetting the agreement.
A high official in the Pakistan Railways told Business Recorder that it was admirable that as a responsible company, despite changing economical situation and other difficulties, the Chinese state-owned company was maintaining its prices of more than 14 months ago as a good gesture of co-operation towards Pakistan.
DEC Chief Executive officer Li Hong had also appreciated the role of Federal Minister for Railways Haji Gulam Ahmad Bilour in finalising the contract on merit. He said this decision would further strengthen the bilateral as well as business and friendly relation between Pakistan and China.