BSC set to miss deadline again in signing deal

Syful Islam

The Bangladesh Shipping Corporation (BSC) is set to miss deadline again in signing a financial deal with the Chinese Exim Bank for procuring six vessels for its fleet, officials said.

The Chinese bank had extended the deadline until December 31 from November last on the government's request.

However, the amended document of a previously-signed commercial deal is yet to get vetting from the Ministry of Law Affairs (MoLA) which further needs to get approval from the Cabinet Committee on Economic Affairs (CCEA) before signing the financial deal.

Contacted, BSC managing director Moqsumul Quader told the FE, getting the document vetted from the MoLA and the CCEA within the remaining days seems to be impossible.

"I had talks with the Economic Relations Division (ERD) officials. They assured me of seeking further time extension if we fail to sign the deal within the stipulated period," he said.

Mr Quader said the parliamentary standing committee on the Ministry of Shipping (MoS) at a meeting on Wednesday last asked the ministry to quicken the process and sign the deal immediately.

"They inquired about the reasons behind the long delay in completing the deal-signing process. They asked us to remove the obstacles for procuring the vessels," he added.                     

Earlier in April last, the BSC signed a commercial deal with the CMC (China National Machinery Import and Export Corporation) for supplying three product carriers and three bulk carriers.

The deal was signed with vetting from the MoLA, the National Board of Revenue and the ERD. The Cabinet Committee on Economic Affairs declined to approve the US$184.50 million commercial deal and asked for placing it again with vetting from the trio.

The issue was further delayed when the MoLA raised question about the deal-signing process, especially the authority of the BSC managing director to ink the deal. Both the MoLA and the ERD raised several questions about the commercial contract and asked for coming up with clarification.

Besides, the ERD sought adjustment of various clauses of the agreement which it found unfavourable to the state-run corporation.

The ERD called for bringing down the condition of paying 30 per cent of the total cost in advance to 10 per cent. Besides, it also sought to raise fine to $5,000 from $3,000 each day in case of the CMC's failure to supply vessels timely.

Talking to the FE, an expert, who is familiar with the amended commercial deal, said the payment provision, mentioned in the document, is 'faulty'.

He said in the contract document, conditions are there for paying 25 per cent money of the total cost to the supplier within 10 days of signing the financial deal, 20 per cent more during cutting steel plate, and 20 per cent more within seven days of keel laying.

In this process, the major portion of the total cost will be given to the supplier within six months of deal-signing which normally does not happen, he said. Usually such a big portion of payment is made in several phases during the construction stage, he added.

Referring to another condition, he said the BSC will be able to make claim for refunding money with compensation after 285 days of the deadline.

"Since majority portion of the total cost is being paid to the supplier within six months, the refund claim period can be brought down to maximum 180 days", he added.

Officials said one-fifth of Chinese shipyards fail to deliver vessels in time. Many even take several years to supply vessels after the stipulated deadline is over. In this case, many European buyers do not take delivery of vessels, rather take refund of money with fines.

An official suggested for re-checking the clause of the commercial contract, relating to the refund of money, by international legal experts.

He said during the Ershad regime, the BSC signed a deal with the Pakistan Shipping Corporation for ship purchase and made a significant amount of payment. After coming to office, the next government did not take delivery of the ships.

However, even after two decades of the deal, the money is yet to be refunded because of flaw in the related clause of the contract. The ERD is still trying to get the money back, the official added.

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