Procurement of transformers: HEC accuses Pepco of giving unfair advantage to PEL

[Naveed Yaseen]

MUSHTAQ GHUMMAN
ISLAMABAD (May 15 2009): Heavy Electrical Complex (HEC), a state run entity, on Thursday in a presentation to Minister for Industries and Production Mian Manzoor Wattoo accused the Pakistan Electric Power Company (Pepco) of giving "unfair advantage" to the inexperienced Pakistan Engineering Limited (PEL), in procurement of transformers as the latter did not qualify to participate in tenders.

"The PEL, through cost advantage of using Wapda foundation facilities, quoted unrealistic prices and secured orders of 12 transformers last year. "The PEL cost advantage affecting the HEC was discussed with the Pepco and Mepco, which agreed to load 15-25 per cent to PRL, but the decision has yet not been implemented," the HEC's management stated in the presentation.

Manzoor Wattoo, according to an official statement, who presided over the meeting, assured his full support to the HEC in resolving the issues. Another major demand of the HEC management was immediate delisting of the entity from the privatisation list, ensured regular business from Pepco for optimum capacity utilisation, resolution of other issues like delay in placing of orders, refund of LDCs and warranty claims deductions.

Exemption from submission of bank guarantees on advances/performance and provision of price escalation are some of the demands that were presented by the HEC in the meeting.

"Discos orders are at fixed price and do not incorporate escalation clause, although considerable time is consumed in placement of orders after tender opening. Delay in orders result in abnormal increase in material prices, labour charges and utilities in the intervening period," the HEC said.

According to the presentation, non implementation of 1987 agreement by the Water and Power Development Authority (Wapda), unfair competition by local manufacturers, phasing out of five out of seven types of transformers by Pepco for which technology was originally acquired from China, lack of comprehensive testing facilities and uneconomic power transformers design are the factors negatively effecting the HEC's performance.

In 2006, while realising the financial difficulties, the HEC was exempted from submission of bank guarantee by the Economic Co-ordination Committee (ECC) of the Cabinet, which directed the Wapda to place orders without seeking any guarantee, which was later annulled due to the conditions of the World Trade Organisation (WTO).

Now the unit has again requested the government that Pepco should be advised to exempt it from submission of bank guarantee against advance payment and performance bond, as it is a government concern.

In another presentation, Pakistan Machine Tool Factory (PMTF) asked for provision of funds for rapid indigenisation of wind turbines, and technology transfer agreement with the world's leading technology houses/manufacturers should be signed. The PMTF also proposed that the government should install few wind farms in public sector and award the contract to it. Subsequently, the private investor should also be encouraged to procure locally manufactured equipment.

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