0
LAHORE, March 18: Irregularities by the Water and Power Development Authority in purchase of electricity meters during the last three years have resulted in an overpayment by consumers of more than Rs1 billion.
Documents available to Dawn indicate that about three million meters have been purchased from a cartel of three manufacturers at a price of at least Rs300 in excess of the last approved tender bid.
The Wapda had floated in 1999 an international tender (786-06) under an International Bank for Reconstruction and Development loan (3764-PAK) for 200,000 single phase AC energy meters at an estimated cost of $3.27 million. Six companies participated in the bidding. The bids were opened on Feb 25, 1999.
The China National Machinery and Equipment Import and Export Corporation, China, quoted a price of $13.38 (Rs682) per meter, the China Metallurgical Equipment Corporation, China, $12.98 (Rs662) and ISKRA EMECO, Slavonia, $25.50 (Rs1,300). The three local companies, namely the Syed Bhais (Pvt) Limited, Escorts Pakistan Ltd and Pak Elektron Ltd offered to supply meters for $14.25 (Rs727), $18.10 (Rs923) and $15.93 (Rs812), respectively.
Adding a 15 per cent charge (known as Domestic Preference) to the international bids, the 10-member evaluation committee found the Syed Bhais’ bid the lowest and recommended that they should be granted the contract.
Despite the evaluation committee report, on July 30, 1999, the contract was awarded to the China National Machinery and Equipment Import and Export Corporation (purchase order 2139- 43CE(ELR/IBRD-3764/786-06).
Under Wapda rules, the evaluation committee report cannot be overruled. Should the authorities have an objections, the report can be referred back to the committee. In case an irregularity is proved against some or all of the members, they can be disciplined.
A Wapda spokesman later denied that the report was ignored and claimed that the Chinese firm was granted the contract as the lowest bidder. Documents, however, do not support the claim.
ESCALATION: On April 21, 1999, Syed Bhais were issued a purchase order for 600,000 meters at the rate of Rs1,075 per meter, notwithstanding their standing bid to supply for $14.25 (Rs726 at the then exchange rate of Rs51 per dollar). Fresh tenders were not called and the deal was concluded in a closed door meeting in clear violation of Wapda rules which required competitive bidding. Escorts and the PEL, two other domestic suppliers, were also asked to supply 400,000 meters at the same price.
Asked to explain the strange actions, a Wapda spokesman claimed that there was no closed door meeting. He said in view of an acute shortage of meters, the Authority had purchased the entire capacity of the three manufacturers as well as the Telephone Industries Pakistan. “It is not correct that the meters were purchased at a high cost.” Once again, documents signed by Wapda members belie the claim. The spokesman did not say why fresh bids were not called.
Interestingly, Wapda seems to have been quite arbitrary in determining the number of its potential suppliers. Past suppliers, like Climax Pakistan, were neglected despite their having a full assembly line and the possibility of importing meters was altogether ignored.
REPEAT ORDERS: Nor did things stop there. A repeat order (CD-286/0796) for one million meters was issued on Sept 22, 2000, the major share going again to Syed Bhais and the rest to Escorts, the PEL and the TIP. Once again, there was a clear violation of the Wapda rules allowing a repeat order for no more than to 15 per cent of the original purchase. For larger purchases tenders must be called afresh. Also, like the original purchase, the repeat purchase involved a Rs300 million overpayment.
Repeat orders (5326/CE(P&D) /DPE-1/Metres/2001-2002/2650, 5327CE(P&D)/DPE-1/Metres/2001-2002/2682 and 5325CE(P&D)/DPE- 1/2001-2002/2618) were then issued on Nov 6 and 7, 2001, to the same manufacturers for another one million meters. This time, however, the principal suppliers were asked to supply 325,000 meters each. The price per meter was raised to Rs1,125 to compensate for the exchange rate fluctuation. The dollar-rupee parity had, meanwhile, improved in favour of the rupee following the government’s decision to support the international coalition against terrorism.
“It is very easy to stitch the story together,” a source in Wapda said. “It was a classic case of killing two birds with one stone. The bid in tender 786-06 was kept pending for more than five months to gain bargaining time. The Chinese were told that since the evaluation committee report was against them, they had to grease some palms to get the deal through. They did. On the other hand, Syed Bhais were told to increase the price to “accommodate” some high up in the Authority.”
DEFECTIVE: “The sordid affair took another ugly turn when defective Chinese meters were accepted by the Authority,” a source in the director-general (Audit)’s office said. The office wrote to the Authority; “Sub-standard material was supplied and accepted by the authorities concerned due to which the Authority sustained a loss of $2.945 million.” Wapda responded by imposing a three per cent penalty instead of 10 per cent allowed by the agreement, saving the Chinese company around $200,000. The imposition of penalty failed to satisfy the auditor’s office and the matter will be taken up by the Public Accounts Committee, the source said.
When contacted, a spokesman for Wapda denied that any of the meters were defective. He did acknowledge that a penalty was imposed but explained that this was on account of the security box of the meters not being up to the mark. This, he said, did not amount to a ‘defect.’ He did not comment on the extent of penalty.
BENEFICIARIES: The local manufacturers benefiting from Wapda decisions said their rates for local sales were bound to be higher than for export orders. This, they explained, was because they got customs concessions on imports required for international deliveries. The Customs Department, however, said: “Yes, they get some relief but only on finished components. That, in case of Syed Bhais, hardly forms three per cent of the meter. If the cost must be added, it should be only 20 per cent customs duty on about three per cent of the total cost.”
Another justification given for the higher price was that the manufacturers can avail of the export finance facility for an export (or international tender sale). The bankers, when contacted, denied the claim by pointing out that local financing against a confirmed letter of credit was only about three per cent costlier. This should not have increased the cost beyond Rs800.
REAL COSTS: Sources in Wapda revealed that a committee had recently been formed, following some members’ insistence to determine the manufacturers’ cost of these meters. The cost determined by the committee came to about Rs550. The difference between the cost and Wapda’s purchase price reportedly ‘scared’ the Wapda authorities and they did not follow up the matter. The exercize was abandoned before a leak to the press could lead to a storm. The report, the sources said, has vanished without a trace.
Explaining the difference in costs, an employee of one of the manufacturing companies said Wapda had never asked the local companies to have their products validated from their principals. Wapda’s failure to force the manufacturers to get their products tested for quality, allows them to use some parts being imported from Taiwan that compared to the branded products, come very cheap. The difference, he said, had probably been spotted by the Wapda experts. “Fortunately the matter was hushed up.”
