Trading Corporation of Pakistan (TCP) has refused to grant an extension to Sadan General Trading Corporation LLC(SGT) in contracted sugar delivery time and is expected to scrap the contract with the firm on Wednesday (today), well-informed sources told Business Recorder.
The national grain procurement agency had awarded two sugar tenders of 100,000 tons (50,000 tons each), to SGT but the firm failed to confirm shipment schedule as per the contract. An irrevocable transferable letter of credit (LC) for $30,712,500 favouring SGT was opened on March 6, 2010 by National Bank of Pakistan (NBP).
However, SGT could not ship by the extended shipment deadline of April 6, 2010 while Ministry of Commerce finally refused to grant further extensions, leaving TCP Chairman with no choice but to proceed with Cancellation of Contract and recovery of damages besides forfeiture of Performance Guarantee.
The quantum of such damages including but not limited to damages on account of extra expenditure, loss of revenue or loss of industrial production in the buyer's counter and loss of other benefits to the buyer will be determined at the sole discretion of the buyer.
As per tender terms, SGT has already agreed that TCP shall not be liable to any risk and cost whatsoever in consequence of such cancellation of the contract. Talking to Business Recorder on Tuesday, TCP Chairman S Anjum Bashir confirmed that TCP had rejected the request of SGT for a further shipment extension. "I will cancel their contract on Wednesday and forfeit their cash performance guarantee of $585,000 if SGT fails to give details of shipment by Tuesday midnight," said Chairman TCP. According to Bashir, TCP can give further shipment extensions to the party at their sole discretion but he will not do so in the best national interest.
TCP Chairman also said that he would not allow further malpractices in TCP at any price. TCP will now have an opportunity to take advantage of falling international sugar prices and procure this sugar at a lower price. On March 10, 2010, SGT was awarded another contract for the supply of 50,000 Mt white sugar at $649.00 PMT C&F Karachi.
However, since SGT has already defaulted on its first contract, TCP is likely to cancel SGT's 2nd contract as well and refrain from making any future purchases from SGT due to their earlier default. Sources in Ministry of Commerce told this scribe that the Ministry is expected to remove two TCP Directors who allegedly ensured that SGT was declared pre-qualified at the 11th hour.
Chairman TCP and officials at the Ministry of Commerce should be given credit for not allowing vested interests to further protect SGT who defaulted on a 50,000 Mt contract of white sugar @ $585.00 PMT C&F Karachi awarded on February 19, 2010 according to a market player.
TCP clarification: Apropos a news item "Imported sugar delivery time uncertain, USD 30m government money at risk," carried by Business Recorder on April 5, the Trading Corporation of Pakistan clarified on Monday (April 5) that no government money is at risk.
"Briefly M/s. Sadan General Trading, being the lowest bidder, was awarded contract for import of 50,000 MT at the rate of USD 585 PMT C&F Karachi, against sugar tender opened on 17th February, 2010. "According to terms of the tender, the successful bidder, on receipt of award better provides Performance Guarantee within 5 calendar days.
The supplier M/s Sadan General Trading accordingly deposited USD 584,974 in TCP's account in lieu of Bank Guarantee. TCP on receipt of Performance Guarantee, in this case cash deposit, was required to open L/C within 5 days, which was opened on 06.04.2010 (late by 7 days) in favour of supplier for 50,000 MT of sugar.
"The tender requires the supplier to ship the cargo of at least 12,5000 MT + 10% within three weeks time from the date of opening L/C ie by 27th March, 2010 and subsequent shipment of same quantity after every one week. The supplier has though nominated vessel, which was scheduled to leave the Brazilian port on 27th March but has not been loaded yet.
The tender also stipulates that in case goods are not shipped within contracted period, the buyer will accept late shipment for a maximum period of 10 days subject to payment by the seller of late shipment penalty at USD 0.10 PMT per day, which expires on 6th April, 2010.
Therefore, the party is within the stipulated timeframe. TCP is vigilantly following the party and has sent a letter dated 1st April, 2010 to the supplier asking them for shipment before the expiry date, failing which, the contract will be cancelled and security of US $584,974 will be forfeited. The supplier has requested for extension of one week to which TCP management reserves the right to give extension.
"It may also be clarified that there is no shortage of sugar and under another contract first ship carrying 19,500 MT will arrive by 22nd April, 2010. The second ship carrying 20,500 MT by end April, 2010. Hence in the month of April, 2010, TCP will have stock of 50,000 MT sugar. Another L/C for third contract for import of 200,000 MT is also being established and supply from Dubai will take only 3-4 days voyage, hence there will be enough sugar with TCP from May onwards. "To sum up, TCP will not incur any loss," the TCP clarification concluded.
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