Urea deal: Who over-ruled Cabinet board?

Questions are being raised over Singapore-based Singha International Pte Ltd being awarded a urea tender by the Ceylon Fertilizer Company (CFC) for three parcels of 12,000 metric tons of urea each, manufactured in Russia Ukraine at a cost of US$299 per metric ton. Sources close to the CFC told The Sunday Times that Singha International failed to submit a manufacturers certificate and an analysis certificate, both required for the tender. In addition, the Technical Evaluation Committee (TEC) did not recommend the company to the Cabinet Appointed Tender Board (CATB), Thereafter the tender was cancelled and fresh tenders called for the same quantity of urea.

However, it is now alleged by certain insiders that CATB's decision to reject Singha International was overruled by higher authorities and the tender subsequently awarded to Singha International. Singha International now has to open a 10% performance bond which insiders believe will not materialize. National Fertilizer Secretariat Director Ranjan Dharmawardena told The Sunday Times that the bids received for the urea tender were evaluated by the TEC on 180-day credit basis because financial provisions were not available for budget estimates for this year.

“We received six offers including the one from Singha International. We called for tenders for 180-days credit but Singha had quoted its price for ‘at sight’ payment,’ he said. “Though it is money saving for the Government, the CATB cannot make a decision to give the tender to Singha because it was not within the tender requirements and because of financial constraints,” he said.

An ‘at sight’ offer means the supplier will get paid immediately the shipment is received and inspected. After receiving the ‘at sight’ offer, the tender board decided to terminate the tender procedure and leave it for the Cabinet to make the final decision on whether the offer should be accepted. “If the Cabinet decided to accept the ‘at sight’ offer with the concurrence of the Treasury, we can proceed accordingly,” Mr. Dharmawardena said.

He also said Cabinet approval had to be obtained even though a Cabinet paper has already been submitted. According to him, the Cabinet has yet to discuss the matter. Mr. Dharmawardena said the performance and history of Singha International has been checked as it was a compulsory requirement for the tender procedure.

However, he did say that it was not possible to say at once how efficient the company was because of fluctuations in the world market, common in the fertilizer industry. Asked if the credentials of Singha International had been checked, CFC Chairman L. Jayasekera told The Sunday Times that he would have to check with his finance manager on the qualifications of the company. When asked if Singha International has been in the urea or fertilizer business previously, Mr. Jayasekera said he knew of shipments made to China. He confirmed, however, that the tender has not yet been awarded and that a Cabinet paper seeking approval to award the ‘at sight’ terms tender to Singha International was submitted to the Cabinet on October 1.

Parties familiar with the urea trade have said they are certain this company would not perform even if a 10% performance bond was established because urea could not be purchased at such a low price in the world market unless something was wrong with the product.

At the same tender, the next best offers were from Toepfer International for the first parcel at US $381.85 per metric ton, from Swiss Singapore for the second parcel at US $381.25 per metric ton and the third parcel at US $379.50 per metric ton. These offers were on a letter of credit on 80-day terms.

Meanwhile, Singha International is offering urea at US $299 per metric ton, nearly US $80 to US$87 cheaper than the other offers. Critics said the CFC has not thoroughly checked Singha International's credentials and describe it as a ‘fly by night company’.

They also feel that the deal will leave the CFC with ‘egg on the face’. They are urging the CFC to purchase the urea from reputed, recognized and registered international fertilizer companies.