ISLAMABAD: The Public Procurement Regulatory Authority (PPRA) has granted exemption to SSGC-LPG (Pvt.) Limited (SLL) for procurement of up to five cargoes of Liquefied Petroleum Gas (LPG) for five months (November 2023 to March 2024) and procurement of LPG with the condition of lower prices, sources close to Secretary Finance told Business Recorder.
Sharing the details, sources said on October 20, 2023, Managing Director PPRA informed the Board that Ministry of Energy (Petroleum Division) in a letter of October 03, 2023 requested PPRA to allow exemption under section 21 of PPRA Ordinance,2002 to SSGC-LPG (Pvt.) Limited (SLL) from Rules 8,9, 13,35 & 40 of public Procurement Rules, 2004 for procurement of 20000 MT spot LPG cargoes, i.e., around four to five LPG cargoes per month for upcoming winter season with effect from November, 2023 till March 2024.
He further apprised the Board that Secretary (Petroleum) and MD SLL have been especially invited for presenting and defending the agenda item in this regard. Secretary Finance/ Chairman PPRA Board invited secretary Petroleum and MD SLL to further present the case.
20,000MT per month from Apr to Sep: Buying LPG spot cargoes exempted from PPRA rules
With permission of Secretary Finance/ Chairman PPRA Board, MD SLL informed the Board that domestic natural gas production is declining @8-10% per annum, and diverting expensive LNG/RLNG to domestic sector is not a viable option due to involved subsidies, circular debt and huge receivables. LPG is a cash product and 50% of demand is being met through imports by private multinational companies.
Therefore, no financial risks are involved in LPG supply chain business or government accrues no circular debt even after involvement of SOEs, which ensures regular supplies, maintain prices, and neutralise black marketing and artificial shortage.
However, the role of SOEs in this sector is minimal and options for market expansion are much higher. He further apprised the Board that SLL brought 30000 MT last year. With regard to required exemption of rules 8, 9, 13, 35 & 40 of public procurement Rules to procure 20000 MT Spot LPG cargoes, i.e., around four to five LPG cargoes per month, MD SLL provided justifications.
One of the Board Members observed that the Ministry of Energy has been presenting the issue to the PPRA Board frequently in the past and queried whether it was more convenient to consider it making a permanent feature in the rules rather than presenting the agenda again and again to the Board.
Another Board Member opined that previously Board had approved a separate rule for enabling such kind of procurement; hence, the PPRA management may like to update the Board on the status of the said rule.
MD PPRA apprised that the Board had approved Rule 21(A) for enabling such kind of procurement. After approval of the Board, the said Rule was forwarded to Cabinet Division.
Thereafter, Law Division had proposed certain amendments requiring ratification of the Board. The said rule with proposed amendments of Law Division as conveyed by the Cabinet Division in letter of September 20, 2023 was placed in the 73rd meeting of PPRA Board heard on October 06, 2023, which was accordingly approved by the PPRA Board. Subsequently, PPRA management forwarded the approved Rule 21 (A) to Cabinet Division for further necessary action.
Secretary Finance/ Chairman PPRA Board requested PPRA management to appraise the current status of the said Rule. MD PPRA reiterated that the proposed Rule 21(A) is with the Cabinet Division for placement before the Federal Cabinet.
Another Board Member observed that three to four months back, PPRA Board had accorded approval of the said rule, and opined that PPRA management may like to provide the details of the said rule 21 (A) with timelines for further consideration. PPRA management assured provision of the required timelines to Secretary Finance/ Chairman PPRA Board.
Another Board Member stated that justification of Ministry of Energy (Petroleum Division) regarding exemption of Rule 35 for the mandatory fifteen-day waiting period from the final evaluation report to the procurement contract award seems viable as the said rule provides an extra caution to the procuring agency to wait for fifteen days before award of the contract in view of any expected grievance by the bidder during the intervening period of fifteen days. However, the said precaution is not applicable in case of spot procurement from international market.
With regard to exemption of rule 40, i.e., “Negotiations, the Ministry may like to consider downward price negotiations”, the Ministry has sought exemption to negotiate quantities increase or decrease with the successful bidder as all other importers procure LPG after negotiations with the bidders. He further emphasised that the Ministry of Energy has also sought exemption of Rule 9 “splitting or re-grouping,” where the Ministry is of the view that said exemption is required to split or regroup orders as needed.
He apprised the Board that there is a purpose to disallowing, splitting or regrouping, which needs to be adhered. He proposed that the Ministry may like to follow the principle of lowest price for the “whole quantity” and may consider splitting the required quantity from various suppliers at the “same lowest price” rather than procuring the said required quantities at a higher price.
He further opined that with regard to “Response Time,” stipulated under Rule 13 of public Procurement Rules, 2004, it may be noted that it is not applicable to the spot market; hence, the “Response Time” shall be in accordance with the spot market dynamics. He further concluded that the Ministry may not be exempted from the requirement of Rule 8 “Procurement Planning” as the Ministry is required to plan their proposed procurements for each financial year.
Secretary Finance/ Chairman PPRA Board endorsed observations of the Board Member, especially with regard to Rule 9, splitting or regrouping, to follow the principle of “lowest price, for the, whole quantity, He further emphasised that the Ministry of Energy (Petroleum Division) may consider splitting the required quantity from various suppliers at the “same lowest price, rather than procuring the said required quantities (through splitting or otherwise) at higher price.”
After thorough deliberations and in view of the justifications of SLL reflected under Para 4 in the national interest for procurement of 20000 MT spot LPG cargoes, i.e. around four to five LPG cargoes per month for upcoming winter season with effect from November, 2023 till March 2024, the Board decided to recommend to the Federal Government under Section 21 of PPRA Ordinance, 2002 for grant of exemption to SLL “for upcoming winter season with effect from November, 2023 to March 2024 from applicability of Rules 13, 35 and 40 of public procurement Rules-2004 for procurement of 20000 MT spot LPG cargoes”, i.e., around four to five LPG cargoes per month to the extent of relaxing the period between the announcement of Evaluation Report and award of contract to the successful bidder.
The Board also decided to recommend to the Federal Government under Section 21 of PPRA Ordinance, 2002 partial exemption to SLL from applicability of Rule 9 of public procurement Rules,2004 provided that the Ministry of Energy (Petroleum Division) shall consider the principle of “lowest price for the whole quantity’ and shall consider splitting the required quantity (if required) from various suppliers at the same lowest price” rather than procuring the required quantities at a higher price.
