Urea scam sent to FIA for more investigations

April 26, 2014


Urea price
Urea price

National Fertilizer Marketing Limited (NFML) – a subsidiary of Ministry of Industries and Production (MoI&P) – has sent urea scam of billions of rupees for further investigation to Federal Investigation Agency (FIA), official sources from Lahore told Business Recorder. The sources said the Prime Minister”s Office had directed the MoI&P to conduct a fact-finding inquiry into 100,000 MT of urea that was not transported to up-country last year despite the shortage of the commodity in the country.

The then three relevant officers were Fakhar Ahmad Cheema (General Manager Marketing/ Distribution), Gul Sher Ahmad Chachar, Incharge NFML, Post Office, Karachi and Kashir Riaz Khan Incharge Godown Karachi; two have been suspended while the third is still at large. Official documents obtained from NFML reveal that the Prime Minister”s Office, in a letter on December 17, 2013, conveyed serious displeasure of the Prime Minister of Pakistan for a delay in transporting the imported urea upcountry from Gwadar and Karachi resulting in a shortage and a price hike of urea.

In accordance with the directions of the Secretary Ministry of Industries & Production (MOI&P), Sr. Joint Secretary (FAR), Ministry of Industries & Production, visited NFML Godowns at Karachi on December 19, 2013 together with the Chairman, NFC/MD, NFML and reported that old urea amounting to almost 100,000 MT from the last Kharif season was found stocked in these godowns.

To investigate the entire matter an inquiry committee was constituted with the following: (i) Muhammad Ashfaq Ghumman, Joint Secretary (MED), MOI&P, Chairman; (ii) Sa”ad Fazil Abbasi, Deputy Secretary (B&C) MOI&P, Member; (iii) Muzammil Pasha, Cost Accountant MOI&P, Member; (iv) Kamran Saeed Senior Manager NFML, Member; and (v) Faiz Bukhari, Acting GM NFML, Member.

Terms of Reference of the committee were as follows: (i) to probe the matter regarding inability of NFML to timely transport urea from Gawadar/ Karachi Ports to upcountry; (ii) to ascertain as to whether any individual of NFML is involved in storage/black marketing of urea or otherwise; and (iii) to probe the serious matter regarding stocked urea of almost 100,000 MT from last Kharif season at godowns of NFML, Karachi.

According to documents, the first meeting of the committee was held on January 10, 2014 in the office of Joint Secretary (MED) MOI&P. During the meeting, the chair asked the representatives of NFML to provide the following information/record for the purpose of verification: (i) process/procedure adopted for the transport of urea from Gwadar/Karachi to upcountry; (ii) define the obligations of the carriage contractors to transport urea upcountry within stipulated time; (iii) reasons for a delay in transportation of 100,000 MT urea from Karachi to upcountry; and (iv) any other record that may be helpful to the inquiry.

The representatives of NFML replied to the queries as follows: (i) the clearance of imported urea from port including taxes & duties is the responsibility of TCP; (ii) subsequently equal store wise allocation to the Cartage Contractors (CCs) is prepared and implemented province-wise; (iii) stock Transfer Notes (STN) are prepared and handed over to CCs; (iv) when the imported urea is cleared from respective ports (Gwadar/Karachi), it is transported to NFML godowns at Karachi; (v) however, where the vessel has berthed at Karachi Ports, godowns are not used and the Urea is dispatched to the upcountry stores; (vi) urea is loaded from Karachi godowns for upcountry stores and STNs are prepared in the same way as at Gwadar Port and a copy is handed over to CCs for transportation to upcountry; and (vii) carriage contractors transport the fertilizer to the designated destinations within the maximum time calculated from the time loaded trucks leave Gwadar port ie up to 1000 kilometer four days, up to 1001-1500 kilometer, six days and above 1500 kilometer, eight days.

A margin of 5 days is allowed for the transportation of urea from Gwadar to Karachi godowns. In this way a maximum time to transport urea from Gwadar to up country is 13 days. The cartage contractors are responsible to transport urea from Gwadar port to up country within 13 days. In case the cartage contractors fail to deliver the fertilizer within the specified time he will be liable to pay damages @ Rs 400/ten Mt for each day of delay. NFML noted the following two reasons for a delay in the transportation of imported urea: (i) Sindh Transportation Association Strike from November 4, 2013 to November 18, 2013; and (iii) a heavy import of phosphate fertilizer and coal engaged the private transporters.

The representatives of NFML further stated that emergency arrangements were made for transportation of the old stock of 100,000 MT of the last Kharif season 2013 and the stock-flow position is as follows: (i) the inquiry committee felt it appropriate to seek further information from NFML regarding the cost of total quantity of 90,000 MT urea imported in 2013 along with procedure and a mode of payment to TCP including the interest rate on letter of credit (L/C). In response, NFML informed that (a) the value of 90,000 MT urea is Rs 2880 Million (excluding subsidy given to the farmers by the government); (b) payment of TCP by NFML is made through bank drafts against invoices raised by TCP to NFML, with the approval of MD NFML; and (c) no interest is paid to TCP or Bank by NFML.

Subsequently, National Fertilizer Development Centre (NFDC) was requested by MOI&P on January 24, 2014 to intimate the loss incurred due to non-transportation and timely utilisation of the approximately 100,000 MT Urea by farmers in upcountry.

NFDC, in its reply on February 7, 2014, reported that the contribution of fertilizer in increasing crop productivity remains in the range of 30-50 percent or even more depending upon the application of fertilisers with appropriate method. However, as per a careful estimate, NFDC argued that for Kharif season 2013, the crop productivity loss for upcountry region is about Rs 7.4 billion. NFDC also argued that apart from agronomic/crop production losses, the financial losses to national exchequer are in the shape of utilising foreign exchange (estimated as US $36.1 million) and providing a subsidy (estimated as Pak rupees 1.5 billion) on the import of 100,000 tons of urea. In addition, over-storing or delay in distribution results in increasing the cost of storage port demurrage charges and also creates an artificial shortage in the market and enhancement in urea price during peak period which disturbs the economics of fertilizer use by farmers negatively.

In the meeting of a committee held on February 04, 2014, it was decided to seek further information from NFML on the following two points: (i) supply requests from dealers for imported urea form August 2013 & onward and when these supply orders materialised; and (ii) pending supply requests from August 2013 onward. According to NFML, during the period August-2013 to January-2014, NFML received orders for 697,045.49 MT urea, out of which 157,391.55 MT remained pending.

After scrutiny of record which was provided by NFML, the committee observed that during the period from September 19, 2013 to 11th October, 179,340.45 MT urea was cleared from five ships; however, 93,697 MT urea was stalled at Karachi godown and its upcountry transportation began on December 15, 2013 after lapse of three months.

After careful examination of the record and lengthy deliberations during a series of meetings of the committee and taking cognisance of the circumstances and taking stock of affairs of NFML in handling imported urea for its transportation to upcountry destinations for its timely usage by the farmers for Kharif Season 2013 the Committee concluded that: (i) 93,697 MT imported urea was kept stocked at Karachi for about three months. It shows that the officers/officials who were responsible for transportation of this urea within 13 days of its loading from Gwadar showed a criminal negligence; (ii) on a query raised by the committee, NFML confirmed that during the period August-2013 to January-2014, NFML received orders for 697,045.49 MT of urea, out of which 157,391.55 MT remained pending/unmet. This clearly indicates that 93,697 MT of urea was kept undelivered while there was an acute shortage of urea in the market. The committee has observed that the storage of 93,697 MT of urea for about three months has not only affected the poverty-stricken households of farmers but it has also caused a productivity loss to GDP to the tune of approximately Rs 7.4 billion as calculated by National Fertilizer Development Centre (NFDC) of Planning Division of Government of Pakistan owing to non-distribution by NFML and non-utilisation of urea by farmers during Kharif Season 2013. A country with subsistence economy like Pakistan cannot afford this type of criminal negligence by officers / officials of NFML.

According to the information obtained from NFML, the committee concluded that three officers of Marketing and Distribution Department of NFML in the same post during August 2013 to December 2013, were responsible for an inordinate delay in the transportation of 93,697 MT of urea to upcountry and its distribution among farmers.

When contacted Acting Managing Director, Basit Abbasi, confirmed that Ministry”s fact-finding report has been sent to FIA for action against the accused. He, however, did not share the details of fact finding committee”s report. An official raised the following questions: (i) how any why Saad Saif Ullah (Deputy Manager Distribution) and other officers got a posting at Karachi stores during 2013? Who was the backer of these officers? (ii) Did G.A. Chachar or any other officer from NFML port office Karachi ever make a single compliant in writing or orally to the head office regarding malpractices done by M/s Sindh Goods Transport Company at any stage? and (iii) Payment equivalent to Rs 35000 bags of urea was paid directly to NAB, Rawalpindi by some of the NFML officers posted at Karachi stores.

Courtesy Recorder

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