KPT responds to charges of selling land for peanuts

[Lahore_Real_Estate]

KARACHI: The Karachi Port Trust (KPT) has clarified a report published in The News, after 13 days, stating that no illegal allotment of KPT land has been made by the trust for ‘peanuts’ or ‘a song’ to KPT Officers Cooperative Housing Society, as alleged in the news report.

The housing society was duly formed in 1949 and registered with the Sindh government under the Sindh Cooperatives Housing Society Act, 1925. In view of past practice of KPT, dating back to 1886 when land was granted in the Lalazar area to the Boat Club on a 99-year lease at the rate of Rs0.13 per sq yds, the KPT has been leasing land for various purposes not directly connected with the operations of the port.

With regard to the society, allotments of the 130 acres were made in three stages starting from 1989, 78 acres, followed in 1990, 27 acres and lastly in 1996, 25 acres. Here, the land allocated to the society was underwater and had to be reclaimed before it could be used for residential purposes.

Other cases of grants of land by KPT for residential-cum-commercial and other purposes include:

1938

8,361 sq yards for Karachi Club annexe

1944

22,296 sq yards to Beach Luxury Hotel

1970

294,965.66 sq yards (61 acres) sold to Pakistan Navy on MT Khan Road for the establishment of Naval Officers Residential Estate-I (NORE-I)

1971

Transferred 630 acres land (a portion of Clifton Scheme-5) to KDA.

2005

Leased 881 acres to Defence Housing Authority, Karachi, as the land in question was marshy area requiring initial investment for land reclamation.

As to the issue of the allocation of land by KPT to KPT United Workers Front of KPT Cooperative Housing Society, the grant of 250 acres was made by KPT in 2006 to the union for the benefit of employees.

In all the above cases, the Board of Trustees had duly approved the grant of lands subject to the approval of the federal government under the relevant provisions of the Karachi Port Trust Act 1886 where the period of lease exceeded 25 years.

It is also relevant to point out that other government organisations such as PIA, Pakistan Railways, KDA, KMC, CDA, Defence Housing Society, Sindh Bar Association, High Court Bar Association etc have their own housing societies for the officers/members throughout Pakistan.

Even in the case of civil servants of the provincial and federal cadre, once they reach BPS 22, they are entitled to be allocated a plot of land.

As to the award of contract to salvage underwater debris at the cost of Rs1.3 billion to M/s Euro Demolition (BV) Netherlands in 2010, it is clarified, that this was an international procurement being undertaken under the Public Procurement Rules, 2004 pursuant to advertisements appearing in the press. Technical and financial proposals were invited from interested applicants and M/s Euro Demolition was found to be most technically responsive given their international experience.

Earlier, an initial award of salvage work to M/s Indus Divers being a local firm in March 2008 at a cost of Rs77.5 million proved unsuccessful due to the complicated nature of the concrete debris underwater.

The KPT had no option, but to terminate the contract in April 2009 and go for a fresh advertisement and award of the salvage contract under the Public Procurement Rules. All decisions with regard to termination, invitation of fresh bids through public advertisement and the eventual award of contract were taken in consultation and with the approval of the Board of Trustees of KPT.

It is further clarified that the construction company (Ssangyong Construction, Korea) which had submitted various proposals from time to time for the said underwater salvage work was unsuccessful since these proposals were not formal bids and did not meet with the technical specifications of the salvage work involved. It was also relevant that the Korean company would, if successful, have outsourced or sublet the salvage work to some other company which would have been in breach of the Public Procurement Rules and KPT requirements.

As to the objection raised by the DAC to the payment of Rs952.61 million to M/s China International Water and Electric Corp, this was not in breach of procedure since the necessary survey was duly carried out by the KPT Survey Board so that adequate and satisfactory measurements were available at all material times.

The DAC has now ordered that the documentation record of KPT be duly counter checked to remove this erroneous objection. Similarly, the objection for failure to deduct and deposit income tax on payments to the same company is also misplaced since the company is tax exempt under Pakistan law. The DAC has also ordered that the tax exempt status should be counter checked by their officials with the Federal Board of Revenue, hence this objection is also incorrect.

Tariq Butt adds: The clarification issued 13 days after the story which appeared on June 18 itself shows the ‘efficiency’ of the KPT.

However, the KPT’s irregularities and lapses, and the loss it caused to the national exchequer were incorporated in the story from the latest report of the Auditor General of Pakistan for year 2010-11.

It is pointless to clarify the story that is based on an authentic government document, which is presented to the president of Pakistan, parliament and the Public Accounts Committee as required under the law. It appears that like several other government organisations, the KPT too did not act efficiently and timely when the AGP was carrying out the audit or it has skeletons in its cupboard that it hid from the AGP.

However, the clarification confirms the irregular transactions but did not respond to a major AGP objection that KPT did not produce record to the audit, and its non-presentation may create doubts as to the actual existence of it at all, and that its Board of Trustees was not authorised to approve these dealings under the rules and law.

The justification that the KPT has given for its irregularities and lapses costing the public exchequer billions should be forwarded to the audit so that it could judge its relevance. The lease of land for a song to the two housing societies of KPT officers and other employees was such a gross lapse that the audit recommended fixation of responsibility and disciplinary action against officials found responsible. Even otherwise it appears a cruel joke that the land was leased just for 10 paisa per sq yard per annum.

The KPT’s argument that other government organisations have their own housing societies for officers, and members have no relevance to the irregularity that it committed, as per the audit, in leasing hundreds of acres of land to the two housing societies.

The clarification did not respond to the objection that when the local firm abandoned the work for removal of concrete structure of collapsed berths, fresh bids were invited, and thereupon, the international firm, which had quoted Rs400 million, quoted Rs800 million for the same work, but later the contract was awarded at a cost of Rs1.3 billion. It only said that all decisions with regard to termination, invitation of fresh bids through public advertisement and the eventual award of contract were taken in consultation and with the approval of the KPT Board of Trustees.

The audit had not agreed to this argument, and had also stated that no record of abandonment of work by the local firm was provided to it even upon repeated request, which was in violation of rules, and in the absence of the record, the propriety and probity of the expenditure could not be ascertained.

Even several months after the audit, the KPT, as per the clarification, is yet to check from the Federal Board of Revenue the status of irregular retention of income tax of Rs24.53 million, which the audit described as a loss to exchequer.

KPT’s present plea and the one it had advanced to the audit earlier was that the company is tax exempt under the law. The AGP had not accepted it as valid.