May 09, 2008	Friday	Jamadi-ul-Awwal 3, 1429

KARACHI, May 8: With the rising complaints of industrial and commercial consumers against the Sui Southern Gas Company, the government is considering scrutinising the SSGC’s procurement policy and taking cognizance of the demands it has recently made to the Oil and Gas Regulatory Authority, it has been reliably learnt.

In addition to the gas company’s procurement for development projects, its past transactions were also expected to be taken up by the government, sources said.

There were many serious complaints about the procurement policy of the SSGC amid reports that contracts were often awarded to the highest bidder for supplying various categories of line pipes and other parts.

Official sources said the gas company had placed a purchase order of around Rs600 million for pipes of different classifications on May 5. But no significant development projects were identified. They said that pipes were required for the replacement of old and worn-out pipes as well as for some “development projects”.

The pipes are being procured despite 35 per cent surplus capacity created by laying new Bajara-Karachi pipeline. The estimated value of total inventory in store was Rs3.5 billion, while the annual procurement was over Rs5 billion, the sources said, adding that the company was violating the procedure of procurement spelt out in the Public Procurement Regulatory Authority Ordinance, 2002.

Tariff demand

Such procurements, sources said, were being made to qualify for 17 per cent increase in tariff by showing higher capitalisation.

They said that orders for pipes ranging from half inch to 12-inch-dia worth Rs650 million were placed from July 2007 to April 2008.

When the SSGC official was asked about the procurement and the steps taken to ensure its quality, he said the utility even allowed the tender of highest bidder in some cases to ensure proper quality of work. The quality was verified by company experts at the vendor’s place before delivery of the order, he said, adding that the quality of pipes and its welding work was inspected before coating of the special imported material.

However, it is not clear on what basis the demand for the procurement was made. Besides, there is no official version about what happens to the replaced material though sources said damaged and scrap material was auctioned. But, gas officials did not give any details of such a transaction. Sources said the violation of rules and dubious transactions were continued despite some internal audit, which unearthed huge losses suffered by the company due to the procurement allowed at higher rates by ignoring the lowest bids.

According to an audit report, the SSGC had suffered Rs244.848 million losses due to award of contract for the purchase of line pipe at a higher rate by ignoring the lowest bids. The audit report observed that the entire deal was “unfair, non-transparent, unjustified and irregular”.

The report also called for a thorough investigation by the higher authorities so that responsibility could be fixed and disciplinary action be initiated against them.