Another Petroleum Ministry scandal

By Bandula Sirimanna

A second irregularity involving the Petroleum Ministry following what happened with the import of substandard petrol has been reported in connection with a fertilizer supplier not being punished for dishonouring a contract.

in both cases – the petrol import crisis and the fertilizer tender – is former Petroleum Ministry Secretary Titus Jayawardane. He was solely involved in the decision to import petrol that was found to contain impurities while in the fertilizer tender, he was heading the Cabinet-appointed committee that recommended the supplier. Following the petrol crisis, Mr. Jayawardane was transferred to the Public Administration Ministry pool. In the latest dispute, a Singapore company has violated terms and conditions of a fertilizer deal it entered into with the state-run Ceylon Fertilizer Co. Ltd (CFC) by not supplying the contracted quantity in full.

The Cabinet-appointed procurement committee headed by Mr. Jayawardane subsequently did not take action against the supplier for failure to complete the contracted quantity of Triple Super Phosphate within the specified period, according to documents obtained by the Sunday Times. Earlier this week Agrarian Services Minister S. M. Chandrasena announced in Parliament that due to contamination of the soil, especially traces of arsenic, owing to large-scale use of fertilizer, the Government was planning to prune the fertilizer subsidy to farmers. The Singapore company supplied 12,582 MT from the contracted quantity of 24,000 MT and held back the balance due to the increase in the world market price at the time of the delivery.

According to clause 7.2 of the agreement, the purchaser has the right to ‘claim any excess costs for products that they may procure due to undelivered goods’. The committee forfeited the performance bond but only issued a warning letter without blacklisting the company, the Sunday Times learns. The Cabinet-appointed procurement committee has the power to blacklist the defaulted company.
The CFC tender for the supply of 24,000 MT of Triple Super Phosphate (TSP) was awarded to Valency International Trading Private Ltd. at US$ 348.94 C&F Colombo with 180 days credit in June 2010 in accordance with a decision taken by Mr. Jayawardane’s committee and the delivery was to be made in October 2010.

Accordingly the company submitted a performance bond for US$ 879,328.80 from the Standard Chartered Bank dated 07-07-2010

The Singapore company then supplied 12,582 MT of TSP out of the total contracted quantity of 24,000 MT. In a letter sent to the company by the CFC’s procurement manager dated 28-01-2011, the company was told it had failed to send the balance cargo before January 31, 2011 even after an extension was given by the procurement committee.

The extension of shipment was granted by the committee to supply 12,000 MT by 25-11-2010 and another 12,000 MT by 10-12-2011. The company opened a performance bond No 2011/349 dated 13-01-2011 for US$ 439,664.40 (Rs 44 million) at the Indian Bank for the supply of balance 10,600 MT. But since it failed to supply the balance quantity, this performance bond was confiscated by the CFC on 08-04-2011. At the time of this default the world market price had shot up to US$ 568.79 a MT. Under this set up the country would have had to pay US$ 219.85 more for a MT for the import of the balance quantity to meet the fertilizer demand.

Fertilizer importers say officials have failed to force the company to reimburse this staggering loss for the country in accordance with contract conditions clause 7.2 which says that in the event the purchaser terminates the contract, the supplier shall be liable to reimburse on demand to the purchaser for any excess costs. However when contacted by the Sunday Times, CFC Chairman Buddhika Madihahewa said they had taken necessary action to forfeit the 10% performance bond but the claim for damages should be made by the Cabinet-appointed procurement committee as it was not within their purview.
He said that since the committee had taken a decision, the CFC had to abide by it. On the other hand the CFC maintains a fertilizer buffer stock and the failure to supply the balance fertilizer stock by the Singapore company has not affected them.

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