July 20, 2012

$86m request

Felix Chaudhary
Thursday, July 19, 2012

THE Fiji government has written to counterparts in India seeking assistance in the write-off of the $86million Exim Bank of India loan used to upgrade sugar mills in the country.

This was revealed to The Fiji Times by Sugar permanent secretary Lieutenant Colonel Manasa Vaniqi yesterday.

"Our Prime Minister Commodore Voreqe Bainimarama has written to India's PM Manmohar Singh and asked that the $86 million be written off. There was an underlying understanding between the two governments as negotiated when the loan was taken. We are now asking that the loan be converted to a grant," he said.

Lt-Col Vaniqi added that unsatisfactory mill upgrades had led to gross inefficiencies at all sugar mills in the country which has incurred costs to the industry and the country running into hundreds of millions of dollars.

"Apart from the fact that the upgrades did not work, we lost a significant amount of revenue caused by stoppages and breakdowns which resulted in inefficient sugar production. We also had to incur an unnecessary expense of a further $123 million to upgrade the upgrade," the PS said.

The Fiji Times had reported in 2010 that previous FSC chief executive officer John Prasad intended to take the Indian contractors responsible for the failed $86 million upgrade to task after consulting with a team of legal experts.

Mr Prasad had revealed that a performance bond was signed with every vendor involved in the upgrade process and he also said they were bound by an official agreement tied in with the Exim Bank loan.

Independent consulting engineer JP Mukherji from India arrived in the country in November 2010 to conduct a survey to determine if works done by contracted vendors were completed to the agreed standard.

"With the arrival of JP Mukherji, the consulting engineer, we should be able to get a detailed report on the state of the equipment that was supplied. He will critique the equipment that has been supplied and the work that has been carried out," Mr Prasad had said at the time.

"The vendors who have not met objectives to agreed specifications will be given an opportunity to rectify shoddy work. Failing that, we will take legal action. There are a few avenues open to us, we will pursue liquidated damages and consequential losses brought about by below par workmanship," Mr Prasad said at the time.

Lt-Col Vaniqi said the report was completed but remained confidential because it was an industry document.

The FSC recorded an unprecedented total loss of $175.1m in 2010. The country's only sugar producer also suffered losses of $19.3m in 2008 and $36.8m in 2009. The downward spiral was attributed mainly to frequent mill breakdowns and inefficient cane processing and sugar production.

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