Trading Corporation of Pakistan (TCP) has forfeited performance guarantee of a sugar mill for its failure to supply sugar to the state-run grain trader as per agreement. Sources told Business Recorder on Saturday that despite an agreement with the TCP, a local mill regretted to deliver sugar as per the prescribed tender terms and conditions.
M/s Kohinoor Sugar Mill signed an agreement with TCP for supply of 2,460 tons of sugar in January this year, when federal government asked TCP to procure sugar from domestic sugar mills as they were facing some financial crisis followed by bumper sugarcane crop and slow sales in the domestic market.
Following the directives of Economic Co-ordination Committee (ECC) of the cabinet, TCP floated a gallop tender on December 14, 2012 for purchase of 330,000 tons and later, in January 2013, finalised deals with some 71 sugar mills for supply of 329,960 metric tons.
M/s Kohnoor Sugar mills was among the mills, which agreed to supply sugar at Rs 52,800 per ton. However, when TCP's surveyor visited the mill for inspection of stock, it revealed that sugar stock was not maintained properly as per term and condition prescribed by the Corporation for procurement of the commodity. On surveyor report, TCP refused to accept the sugar stock and asked the mill for other sugar lots, which should be maintained properly, for inspection and laboratory testing. Initially, the sugar mill agreed to offer new stock, but later the mill refused to supply sugar to TCP.
After receiving a formal regret from the mill the Corporation forfeited 5 percent performance guarantee, deposited by the supplier after sale/purchase agreement with the TCP. "We have forfeited performance guarantee (approximately Rs 6.4 million) of M/s Kohinoor Sugar Mill as it failed to supply 2,460 metric tons of sugar to TCP as per the agreement signed by both parties," confirmed an official of TCP.
While, finalising the sugar supply agreement with TCP every supplier was required to deposit some five percent of total payment/value of the offered quantity as performance guarantee to ensure timely and appropriate supply. As per tender terms and conditions, this performance guarantee can be forfeited in case when a sugar mills fail to honour the agreement. Following the previous practices and tender's condition, TCP had forfeited performance guarantee (five percent of total value) of M/s Kohinoor Sugar Mill, he mentioned.
Sources said that TCP was already indulged in litigation with some six sugar mills, which failed to supply sugar despite an agreement in 2008. These six mills even got payment of billions of rupees from TCP against the sold commodity, however, later they regretted to deliver the sugar, when TCP was seeking to supply procured sugar to Utility Store Corporations (USC). They informed that TCP's sugar procurement operation was almost in its final stage and so far it had made a payment of some Rs 16 billion to 65 sugar mills against supply of 302,900 metric tons sugar. In addition, payment of three sugar mills namely Hamza Sugar Mill, Raheem Yar Khan Sugar Mill and Shakargunj Sugar Mill was under process for a total quantity of 14,760 metric tons. According to TCP sources, out of 70 sugar mills, so far sampling of sugar and bags from 68 mills has been completed and sent for appropriate testing. Out of these 68 mills, survey/testing reports of 65 mills have been received and accordingly TCP made physical payment to these mills. While testing report of two mills is likely to be received in next few days.