AIC in dilemma over old fertiliser contractThe Ministry of Agricultural Development appears to be in a dilemma over whether or not to reinstate an order for fertilisers placed with an Australian company seven years ago.
The Ministry of Agricultural Development appears to be in a dilemma over whether or not to reinstate an order for fertilisers placed with an Australian company seven years ago.
In 2011, Agriculture Inputs Company (AIC) had awarded a contract to supply 30,000 tonnes of chemical fertilisers to Lobana Trading. The Australian company had quoted the lowest price of $565 per tonne.
The shipment has not happened due to continuous disputes between the supplier and AIC. Fertiliser prices have now plunged to $323 per tonne; and if the old order is revived, the government could lose nearly Rs1 billion.
The Supreme Court has issued a final verdict to implement the original agreement. However, the parliamentary Agriculture and Water Resources Committee had last week directed the ministry to put the entire process on hold until its next meeting.
“We decided to reinstate the order for fertilisers a month ago following the Supreme Court ruling. However, the decision has not been implemented,” said Agriculture Minister Gauri Shankar Chaudhary.
“We have not formally sent our decision to the Australian company,” he said, refuting media reports that the ministry had made the decision in defiance of the House panel’s orders.
Chaudhary said that they were waiting for the next directive from the parliamentary committee. “It’s difficult to make a decision. We cannot disobey the court’s orders, but we will be out of a lot of money if we do so.” He added that the ministry would act after the House panel tells them what to do.
Recently, lawmakers and government officials had urged AIC to make an out-of-court settlement with the Australian company so that fertiliser could be purchased at prevailing market rates or they may be paying slightly more.
The Australian company did not submit a performance bond within seven days or sign a consignment contract within 10 days after receiving the letter of acceptance from AIC in 2011. Subsequently, AIC seized the bid bond of Rs30 million submitted by Lobana Trading.
On January 5, 2012, the Australian company’s local representative Swaniga Services filed a writ petition in the Patan Appellate Court, since renamed High Court, stating that AIC had acted with malice and confiscated the deposit money without notice.
On January 9, 2012, the court issued an interim order forbidding AIC from seizing the bid bond pending a final verdict. The court eventually handed down a decision on April 18, 2012 ordering AIC not to seize the bid bond and reinstate the supply contract.
Further complications arose after the Australian company failed to open a letter of credit (LC) to import fertiliser due to its poor credit rating. On February 22, 2013, Swaniga Services told AIC that they would open an LC.
However, the company’s performance bond expired on March 31, 2013, and AIC wrote to Nepal Investment Bank to seize the $847,500 performance bond for failing to fulfill the contract.
On September 11, 2013, the Patan Court issued a mandamus ordering AIC not to seize the performance bond. AIC filed an appeal in the Supreme Court but it was turned down. On December 27, 2015, the Supreme Court issued a final verdict to implement the original agreement.