KARACHI, July 21: Pakistan Steel Chairman retired Col Mohammad Afzal Khan has defended the procedure adopted for the selection of iron ore suppliers to steel mills for the next five years, which, he maintained, has given an annual saving of $1.49 million.

He said no company was shown any favour in award of contract for supply of iron ore nor was any party targeted to be squeezed out of business.

Pakistan Steel requires 1.85 million tons of iron ore every year, which is roughly worth about $55 million or Rs3.19 billion. A supplier gets 15 to 17 cents commission on a ton of iron ore, depending on its quality and delivery schedule. A contract for five years supply virtually gives rental income in millions of rupees to the person or persons representing supplier company in Pakistan.

The steel mills chairman was responding to newspaper articles in which the procedure to select iron ore suppliers to the steel mills was questioned and Federal Industries and Production Minister Liaquat Jatoi and Pakistan Steel chairman were accused of showing favour in the selection of iron ore suppliers.

“The minister did not play any negative role in the deal, and a transparent procedure was adopted to select the iron ore suppliers,” Col Khan asserted.

He alleged that a particular trading house had been one of the suppliers of iron ore to Pakistan Steel for the last 20 years. The pre-qualification condition demanded that suppliers who bid for contract should also own a mine. “But this particular company was simply a trading house and yet had it been winning contracts in the last four bids”, Col Khan said, and an enquiry was now being held as to how this had come about.

Pakistan Steel, he said, carried out iron ore supplier selection after every five years. Four such exercises had been carried out in the last 20 years and a fifth was under way. The mills use a blend of imported iron ores to avoid dependence upon a single source. A price negotiation committee (PNC), which includes five directors on the mills’ board, carries out the procurement exercise and blends are obtained by feeding bids quotations in a specialized computer software. The software programme gives results of the four most economical blends of ore. Contracts are signed after laboratory tests find these blends up to the required standard.

Accordingly, Col Khan said, the fifth tender for pre- qualification of mine owners and producers of iron ore was published in November 2001. He gave in chronological sequence the various stages of the bidding and techno-economic review of the offers till June this year. He told newsmen that he had himself made a formal request for a review of the PNC decision by a committee of the ministry of industries and production.

In the light of the inquiry committee report, the ministry decided to go for re-tendering. But this would have necessitated extension of supply contracts by the existing suppliers till the time new contracts were signed.

Two existing contractors expressed their inability to extend their contracts and finally after deliberations at various levels in the ministry, Col Khan said, it was decided to sign contracts with the suppliers recommended by the PNC. The new contractors are an India-based company with which the contract was signed on July 2 and an Iranian company with which agreement was signed on July 12.

Col Khan offered a point-wise clarification of 10 specific issues raised in the articles published in Dawn revealing that the committee headed by Major-General Mohsin to review the PNC decision was appointed on his request.