A staggering loss of over Rs nine billion has been caused to the national exchequer on the purchase, till date, of 1,200 transformers at Rs 7,600,000 each as a result of National Transmission and Distribution Company's (NTDC's) collusion in the deal. Advisor, Transparency International Pakistan, Syed Adil Gilani in a letter sent on October 22 to Khawaja Muhammad Asif, Federal Minister for Water and Power has invited his attention to the collusion by NTDC for favouring purchase of tap charger, a component of transformer, only from M/s M R Germany.
Referring to TI-Pakistan's letter of September 19 which was based on a report published in Business Recorder, said that the detailed clarification received from M/s 7AAYS, reveals a different story, in which it appears that NTDC in fact has been involved in cartelization with M R Germany, and guilty of anti-competitive practice, causing loss of approximately loss of over Rs nine billion to exchequer by favouring tap charger only from M/s M R Germany.
The Competition Commission of Pakistan's (CCP's) inquiry report of February 28, on the subject, is a proof enough for the minister to take action on corrupt practices, against suppliers as well as against officers involved. In addition to this, the complainant stated that all the On Line Tap Chargers (OLTCs) in the world are manufactured according to International Standard IEC60214-1 2003 and NTDC followed the same specifications for OLTC to be manufactured. However, all NTDC specifications clearly refer to IEC60214-1 2003, but in the tender documents of distribution companies (Discos) under section IV of technical specification, they put a clause using brand name M/s M R-Germany to favour this particular brand which is against the Public Procurement Regulatory Authority (PPRA) Rules. "The power transformer must be equipped with vacuum type On-Load Tap Changer M/s M R-Germany or equivalent specification," according to NTDC's letter of March 22, 2011.
During the award of tenders, subsequent events point out the abuse of dominant position of NTDC and Discos by ignoring discount of bidders, extended advertisement dates, delay in execution of tenders, rejecting OLTCs manufactured by anyone other than M/s M R-Germany and exclusion of bidders for no reasonable basis.
The complainant also submitted that NTDC is involved in agreement(s) prohibited under section 4 of the Act 4 with Discos, M/s M R-Germany and M/s ACA relating to collusive tendering or procurement of transformers. Most of the time, the procurement of transformers were completed at exorbitant prices. The fact that NTDC procured these transformers without even floating a tender is clear evidence of collusion between M/s M R- Germany, agents ACA and NTDC.
Adil Gilani pointed out that NTDC through its letter of March 22, 2011 had instructed all the Discos to incorporate the following requirement in the bidding documents, while tendering for purchase of power transformers. "The power transformer must be equipped with vacuum Type On-Load Tap Changer M/s M R-Germany or equivalent specification". He reiterated that NTDC through its design department works in the capacity of a consultant for various Discos for preparation of bidding documents, lying down of specifications and finally evaluation of bids. Being the consultant, it is not mandatory for the Discos to follow such direction of NTDC; however, Fesco, Mepco and Lesco have followed the instructions of NTDC in procurement of transformers. Such practice indicates that Fesco, Mepco , Lesco and NTDC (through its design department) have prima facie entered into an arrangement for imposing a restrictive trading condition in the market for supply of transformers to NTDC and Discos, prima facie, in violation of Section 4(2)(a) of the Act.
The procurement made by the public sector organisations is the single largest segment of the economy affected by collusive bidding and other such anti-competitive behaviour, caused huge losses to government exchequer. For example it has been noted that in a recent IESCO tender for supply of a single unit of 132KV transformer, the difference between the quoted prices of transformer equipped with M/s M R-Germany OLTC and with a Chinese made OLTC amounted to Rs 7, 600,000/- indicating the level of expenditure involved in such procurements, he said.
It would, therefore, be appropriate and in the public interest for the Commission to initiate proceedings under section 30 of the Act against NTDC, Fesco, Mepco and Lesco for prima facie violation of section 3 and section 4 of the Act, Adil Gilani said. TI-Pakistan requested the minister to examine the complaint of M/s 7AAYS, and the inquiry report of CCP of February 28 for action to be taken against the violators of law. Unless the Ministry of Water and Power exercise its mandate to conduct across the board accountability of cartel makers, who are acting in connivance with public office holders, the electricity shortage in Pakistan will continue, as these elements will continue to create hurdles in project implementation due to their vested interests.