The Trading Corporation of Pakistan (TCP) has reportedly violated rules of Competition Commission of Pakistan (CCP) by fixing sugar price to be procured from Pakistan Sugar Mills Association (PSMA) at Rs 60 per kg. Analysts say that TCP's intention to procure 50,000 tons of sugar from mills at a fixed price falls under anti-competition practices.
Last month, TCP had floated a tender for procurement of sugar from mills with the bidding date of July 9, 2011. TCP had also invited sealed bids from mills who are PSMA members for 50,000 tons of white sugar in poly propylene sacks as per Pakistan Standard Quality Control Authority (PSQCA) approved standards ie PS 1822-1997, PD 1822-2007 (3rd review) and PS 3128-1992, respectively. The TCP, however, disallowed those sugar mills to participate which had defaulted in purchases in the past.
When contacted, Chairman of Pakistan Sugar Mills Association, Javed Kayani, said that he has already taken up the issue with the TCP. "I have written a letter to Chairman (of) TCP arguing that in the tender documents, price of sugar for procurement is already mentioned as Rs 60 per kg contrary to the spirit of CCP, which clearly prohibits fixation of price," he said.
According to him, this will also negate the purpose of open public tender which is meant to get the best possible and fair price whereas the present conditionality vitiates the said purpose. "We requested TCP to waive the condition of fixed price as it is unlawful, and follow the practice already in vogue in the previous tenders," Kayani added.
An official of the Ministry of Industries told Business Recorder that the price of Rs 60 was discussed with PSMA on May 16, 2011 but a consensus could not be developed with the representative body of sugar mills and differences remained on cost of production, amount of arrears due to farmers and the quantity to be purchased.
Another official said that PSMA had boycotted the meeting with the argument that the figures presented by the bureaucracy were unrealistic. Official documents show that the inter-ministerial committee, after thorough analysis of cost calculations and allied matters, had made the following observations/recommendations:
(i) The upper limit of sugar purchase price should be Rs 60 kg; (ii) to ensure that payment to the selling sugar mills reaches the growers, TCP may initially pay 80 percent and, upon receipt of certification from Cane Commissioner's that payment had been made, release the remaining 20 percent; (iii) TCP may procure 100,000 tons sugar in two instalments from PSMA;(iv) contract would include a clause imposing 100 percent penalty if violated; (v) stocks purchased by the TCP will be kept at the Mill, without additional cost; (vi) USC would lift and sell these stocks as and when authorised by TCP; and (vii) USC may sell stocks at purchase price of TCP while subsidising only the incidentals.