Sugar procurement by TCP: poor response leads to issuance of multiple tenders

Poor response from sugar mills to price matching has forced the state-run grain trader to issue multiple tenders for procurement of 150,000 tons of sugar. Although, Trading Corporation of Pakistan (TCP) on Friday completed the procurement of 150,000 tons sugar, it has been made through four tenders instead of two planned earlier. 

Out of total procured sugar, some 18,000 tons was purchased through two tenders conducted in December 2014 while the remaining 132,000 tons procured during this week. Upon TCP request, the Economic Co-ordination Committee (ECC) of the Cabinet, in its meeting held in November 2014, allowed procurement of 150,000 tons of sugar form domestic mills in two phases. Following the ECC directives, TCP conducted two tenders last month but was unable to procure the targeted quantity as most of the sugar mills refused to match the lowest bid. 

The TCP conducted first sugar tender on December 9, 2013 for procurement of 50,000 tons and purchased just 10,000 tons of sugar at Rs 45,000 per ton (including taxes) as all mills refused to match the lowest price. Some 8,000 tons of commodity was procured through the second tender for 100,000 tons opened on December 27, 2013, as out of 53 mills only one accepted the price marching offer. Overall procurement through two tenders stood at 18,000 tons against the targeted quantity of 150,000 tons. 

In order to complete the target, with the approval of ministry of commerce, the TCP conducted two more tenders for 0.132 million tons during this week. The third tender was opened on January 17, 2014 for 92,000 tons and the fourth on January 22, 2014 for 40,000 tons. In response to the TCP”s third tender for 92,000 tons, some 57 parties participated and quoted prices ranging between Rs 49,499 per ton (incl. taxes) and Rs 55,000 per ton (incl. taxes). The lowest bid was received from M/s Hamza Sugar Mill, which agreed to supply 5,000 tons of sugar at Rs 49,499 per ton. The TCP”s bid evaluation committee accepted the lowest bid and the contract was awarded to M/s Hamza Sugar Mill. 

Meanwhile, in order to complete the tender quantity, the TCP offered the rest of bidders, who quoted higher rates in the competitive bidding. In response to TCP price matching, some 49 bidders had agreed to offload some 229,500 tons of commodity with the state-run grain trader against remaining quantity of 87,000 tons. As the price matching was higher than the targeted quantity, TCP decided to procure sugar on pro rata basis and accordingly contract letters were awarded to 49 mills. 

The TCP conducted the fourth sugar tender for 40,000 tons on January 22, 2014, in which some 50 bidders participated and quoted prices between Rs 48,490 to Rs 55,000 per ton (incl. tax). However, interestingly, lowest price was offered by four sugar mills of a group. 

M/s JDW unit I, M/s JDW unit II, M/s JDW unit III and M/s Dharki Sugar Mills submitted a price of Rs 48,490 per ton (incl. tax), cumulatively for 20,000 tons of sugar (5,000 tons each). As all the lowest bids were of same price and conforming to the tender”s terms and conditions, the TCP finalised deals for procurement of 20,000 tons sugar with these mills and asked the rest of 46 mills for price matching to complete the tender quantity. 

Some 29 companies had agreed to match the price for a cumulative quantity of 142,000 tons against balance quantity of 20,000 tons. Therefore, the TCP decided to accommodate all 29 mills by procuring sugar on pro rata basis. Sources said the current procurement has been made for January and February 2014, while the TCP has raised another demand for 100,000 tons for March and April. The ECC is likely to discuss further procurement in its next meeting. The procured sugar will remain in the godowns of the mills; and it will be supplied directly to the Utility Stores Corporation (USC). 

Copyright Business Recorder, 2014

Muhammad Ramzan Rafique
Muhammad Ramzan Rafique

I am from a small town Chichawatni, Sahiwal, Punjab , Pakistan, studied from University of Agriculture Faisalabad, on my mission to explore world I am in Denmark these days..

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