The Port Qasim Authority (PQA) is in the process of awarding second oil terminal to Fotco, without open tendering, according to a complaint received by Transparency International-Pakistan. The complaint pertains to the alleged 'illegal award' of oil terminal, on BOO basis, to Fotco in 1992 and efforts to award second oil terminal to the same party without open tendering.
Transparency International-Pakistan Advisor Adil Gilani in a letter sent to the Secretary, Ministry of Ports and Shipping, has invited his attention to Transparency International-Pakistan letters sent to PQA, pointing out to the orders of Competition Commission of Pakistan (CCP) on the violation of Competition Act 2010, agreement between PQA and Engro Vopak Terminal Ltd (EVTL).
According to CCP Act, PQA is not allowed to grant exclusive rights to anyone, pursuant to any implementation agreement, as it creates entry barriers for new entry and prevents competition, which is not allowed under the Act. The PQA/Fotco agreement dated December 8, 1992 includes an article which was not included in tender documents issued to bidders in 1991.
PQA had confirmed in its replies to Transparency International-Pakistan that the terms and conditions of the tender had been amended by PQA after the tender opening, by adding following three major changes giving undue advantage to Fotco agreement, not offered to others in the tender documents:
--- Perpetual period allowed to Fotco to operate the oil terminal for ever.
--- No other party shall be allowed to build another oil terminal in PQA, for all times to come, except with option of Fotco to refuse first, and Guarantee for 4000,000 tons of oil annual throughput.
--- Adil has further informed the Secretary that PQA legal advisor is misguiding the Authority to take support of Board of Investment (BOI) guidelines for allowing above three post tender amendments/concessions allowed to Fotco. The BOI guidelines for BOT/BOO project were issued in 1988 on August 12, 1998, whereas the tender for oil terminal was issued by PQA in 1991/92. The clarification of PQA legal advisor also raises the issue that the tenders awarded to Fotco in 1992 is illegal, he said.
Transparency International-Pakistan has requested the Secretary to examine and address following issues:
--- Issue of illegality in the award of oil terminal to Fotco in 1992 due to post-tender changes in the terms and conditions in the light of Supreme Court orders in 2005 in the case of Pakistan Steel Mills, and;
--- Invite public tenders for second oil terminal as required under CCP Act section 3.
In March this year, PQA had informed Transparency International-Pakistan that Fotco terminal, with its ancillary facilities, is the first state-of-the-art project in Pakistan through private sector participation, established in PQA for handling of petroleum products, under the implementation agreement of December 8, 1992. Earlier, such projects were established in public sector.
The project was awarded to Fotco on the basis of tender issued by PQA in October 1991, based on competitive bidding. After the award of the project the negotiation process was initiated with the selected bidder and a formal agreement was signed with Fotco on December 8, 1992.
The aspect of first right to enter into negotiations with PQA for the said expansion was incorporated while negotiating with Fotco to bring the first investment through private sector. The agreement was got cleared from Law Division and approved by the government.
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