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NLC suffered loss of Rs1bn in joint venture: AGP

June 23, 2012

ISLAMABAD, June 23: The Auditor-General of Pakistan has unearthed a loss of Rs1 billion suffered by the National Logistics Cell because of irregularities committed in a joint venture for the construction of twin towers on a land leased out by Pakistan Railways.

The NLC had signed an agreement with Enshaa Group for the project spread over 12,95 square yards. The project is now facing the risk of liquidation.

According to an audit report for 2010-11, it is very difficult to assess reasons for the failure of the project because the NLC management did not provide the relevant record to the AGP.

It says that complete files, along with the proprietary certificate, were demanded but neither the contract files nor proprietary certificate was furnished by the NLC.

The report suggests investigation into the causes due to which the relevant record was not be provided to AGP and the work was awarded on a single tender in violation of Public Procurement Rules.

The report says that the NLC was the main investor in the project, but the major shareholding belonged to Enshaa Group, which was not justified. There was no check of the NLC on the affairs of the joint venture.

The report says that the Rs2.3 billion cost of land was paid by the NLC, but the equity share of other partner in the payment could not be assessed in the absence of relevant record.

The NLC management has admitted that the project was a glaring example of mismanagement and irregularities in the past. It pointed out that there had been massive corruption and blunder in the joint venture company, with Enshaa Group in the leading role.

The management admitted that a large sum of liquidity amounting to over Rs1 billion has been siphoned from the company’s accounts through connivance of members of the board of directors and contractors, the report says.

Although the NLC was not exempted from the Public Procurement Rules, it committed irregularity by awarding reinforcement of earth contracts amounting to Rs196.155 million on a single tender.

The report says that the award of works to a party on the single tender basis not only deprived the formation of the benefit of competitive bidding but it was also against the principle of transparency.

The work was not a specialised one because there were so many firms in the business in the country. The report further revealed that the NLC faced a loss of Rs215.83 million on the construction of a cadet college in Swabi. The original cost of the project was Rs452 million which was revised to Rs471 million. The NLC had entered into an agreement with HQ Log Area Peshawar for the construction of the college.In order to complete the project within time, the NLC sub-let the contract to 23 private firms, however, the management failed to manage it in a professional manner.

The NLC purchased tyres worth Rs125.20 million without open bidding. The procurement of tyres and tubes at such a large scale from local market on the basis of hand-collected quotations was not covered under the rules.

The audit report also detailed irregular procurement of stationary and printing material by the NLC worth Rs8.15 million; unnecessary purchase of modules of oracle and their renewal at a cost of Rs8.13 million; irregular appointments and payments worth Rs6.63 million and loss of Rs44.64 million due to non-awarding of contract within validity period.

The NLC suffered a loss of Rs42 million due to grant of loan of Rs200 million to a client for construction of a convey route in Rawalpindi.

The financial health of the NLC did not allow for grant of loan to the clients as its management borrowed an amount of Rs3,671.891 million from different banks.