Make hay while the sun shines
by Farhatullah Babar - THE NEWS , June 27, 2006

A nine-member full bench of the Supreme Court has scrapped the Pakistan Steel Mills deal because the privatisation process had been "vitiated by acts of omission and commission" and because "the final terms offered to the successful consortium were not in accord with the initial public offering given through the advertisement". It said that the deal caused a loss of Rs18 billion to the government besides another loss of Rs15 billion which the government had pledged to pay to the workers as compensation. But no investigations have been ordered and no heads have rolled.

When the steel mills scam was making headlines we had almost forgotten the sugar and stock exchange scandals. The Public Accounts Committee had exposed the scandal that brought a windfall gain to the mafia of over Rs40 billion. When sugar import was allowed some sugar producers imported large quantities of sugar and hoarded it. NAB initially had announced that it would investigate why sugar prices has risen so much but soon it was realised that the mafia's financial support was needed for restructuring the political landscape in the forthcoming general elections. It was then announced that the probe had been shelved in larger national interest. As they say, make hay while the sun shines.

In the locomotives scandal, three former senior military officers were involved and so no investigations were ordered. The Public Accounts Committee admitted that a "mistake" had been made but quickly glossed over it saying that the mistake was made "in good faith". When the issue is raised in the media a routine clarification is issued that says that the PC-1 was vetted and the deal was approved by the cabinet because old engines were grounded and had to be replaced. It is also claimed that the purchases were made with Chinese credit that was tied to purchases from that country. The 400 million dollars credit may have been tied to purchases of railway equipment from China but was it also tied to the purchase of locomotives that were not suitable for Pakistani tracks?

Some three years ago it was said that investigations against the then railways minister had almost been completed and that no evidence of corruption had been found against him. It was also said that most of the irregularities had been committed by senior officials of the railways and not by the minister. Strange logic indeed as the same NAB is chasing a former prime minister because the relevant government departments and functionaries under her had awarded a pre-shipment inspection contract to a foreign firm.

Now press reports say that the National Highway Authority (NHA) has decided to pledge highways and motorways assets to a consortium of banks to raise six billion rupees of loans for meeting its expanding maintenance backlog. But must the authority raise further loans for meeting its requirements or should it mend its shop and stop giving contracts on single-tender basis that it has been doing? No one seems to bother.

According to information placed before the Senate on December 30, 2005, the NHA awarded twelve contracts costing over 18 billion to the Frontier Works Organisation without bids between 2001 and 2005. "The FWO is awarded contracts on single-contract basis because of its inherent capabilities which include a disciplined work force, large pool of equipment, administrative and financial strength", it said. But if the FWO possesses such great strengths, why does it not compete in open bidding? That it was awarded contracts by the NHA worth over Rs18 billion without tenders is not a measure of its strengths but of the weaknesses of both it and the NHA.

It has also been argued that the FWO is preferred and given work without bids because it is capable of working in difficult terrains where ordinary civil contractors are reluctant to work. But the NHA awarded to the FWO contracts for building Lyari Expressway at over five billion rupees, Bund Road Lahore at Rs 551 million, maintenance of Islamabad-Lahore motorway at Rs 138 million and many other such contracts without competitive bidding. To say that no private contractor was willing to bid for these projects is offensive even to those with the littlest of intelligence.

The NHA says that against eight billion rupees in the maintenance cost of highways and motorways the authority raised only five billion annually in toll collection, and hence the need for raising loans. It pays a hefty Rs800 million to toll contractors, which according to the chairman himself 'is higher than internationally acceptable levels', and therefore the need for raising loans.

But the toll contractors are the FWO and the National Logistics Cell, another military outfit, that have been awarded contracts on single-tender basis. According to the information placed before the Senate on May 31, 2005, toll was being collected on 54 locations on various highways and motorways. At all these locations the toll operator is either the NLC or the FWO. Even the private toll collectors' contracts have been cancelled and given to the FWO and the NLC. On December 26 last year a question was asked about the toll contracts given to private contractors. A shocked Senate learnt that two private contracts had been cancelled and awarded to the FWO and the NLC.

One reason given for the cancellation of the contract said: "There was rough handling at toll plazas and transporters started complaining about the dealing of toll operators". But if that indeed was the reason why was another operator's contract not cancelled when on April 15 its men allegedly tortured and killed a bus driver near Kamalpur on the Faisalabad motorway? The toll operator, the FWO, at first remained silent but later admitted "a few hot words were exchanged between a plaza employee and the bus driver" adding also that "during the discussion the bus driver fell down unconscious and was rushed to the hospital but died en route". Nothing happened and the operator continues collecting toll tax.

Not all is well with the NHA itself. Some three years ago the then minister senator Ahmad Ali publicly spilled the beans against his own department and his helplessness to correct the situation. Instead of an inquiry being ordered, the minister himself was removed from his position.

The six billion rupees planned to be raised from banks loans will be repaid at 2.5 per cent interest above KIBOR in seven years. It means a neat windfall of 150 millions rupees a year for seven long years over and above the normal interest to the banks that will lend the money. Make hay while the sun shines. Raising loans from favoured banks will only increase the NHA's liabilities. The government should stop doling out contracts worth billions to military outfits without bids and should not give toll collection contracts at higher than internationally acceptable rates and enforce accountability and make no exceptions on the pretext that they were "honest mistakes made in good faith". But that will never be done. Because when the sun shines, it is the season to make hay.

The writer is a former PPP senator Email: drkhshan@isb.comsats.net.pk