The Trading Corporation of Pakistan (TCP) has finally cancelled its first contract for 50,000 tons white sugar with Sadan General Trading LLC (SGT) after expiry of shipment deadline, sources in Minfa told Business Recorder. Since SGT failed to confirm availability of stocks for inspection prior to loading by TCP's nominated preshipment inspection agency till April 7th, 2010, TCP confirmed that SGT had committed breach of contract and, therefore, the contract stands cancelled.
"TCP wishes to inform you that you have failed to honour your commitment for supply of 50,000 tons white sugar at $585 per metric tons C&F Karachi. The maximum period allowed in the tender terms for shipment stands expired and you have failed to effect the first shipment. Thus, you have committed breach of contract and it, therefore, stands cancelled and your request for further extension of two weeks cannot be acceded to," sources quoted, TCP as saying in a letter to SGT, written on Wednesday evening.
As per tender terms, SGT had agreed that TCP shall not be liable to any risk and cost whatsoever in consequence of such cancellation of the contract. On March 10, 2010, SGT was awarded a second contract for the supply of 50,000 tons white sugar at $649.00 per ton C&F Karachi.
In a bizarre twist of events, even though TCP declared default against SGT's first contract, inside sources confirmed that upon insistence of TCP's Directors, SGT's second LC, amounting to $34,072.500, was opened by National Bank of Pakistan (NBP) and advised through United National Bank Limited, 2 Brook Street, London W1S 1BQ, UK on Wednesday.
"How can TCP execute a contract with a declared defaulter?" questioned a legal expert. Since SGT has already defaulted on its first contract, TCP is likely to cancel SGT's second contract as well, and refrain from making any future purchase from SGT due to its earlier default. The Ministry of Commerce is yet to take action against two TCP Directors who allegedly ensured that SGT was declared pre-qualified at the 11th hour and were reportedly supportive of their second LC opening.
In the ECC meeting held on March 9, 2010 under the chairmanship of the Prime Minister, in Case No 09/01/2010 dated 12.02.2010: Progress on Implementation of National Sugar Policy 2009-10, it was decided that the TCP will import 1.20 million tons of sugar on which duty concessions will be available. The ECC also directed Commerce Division and TCP to streamline the mechanism and advised vigilance in floating tenders and examination of bids. It also directed that procurement of sugar should be expedited to facilitate the general public.