Why does Afghanistan’s gas and oil quality control remain suspended?

Official documents obtained by Kabul Now suggest Afghanistan National Standard Authority (ANSA) and the Therapeutics Chemical Research Corporation (TCRC), an Indian company which has signed a contract to carry out gas and oil quality control in the country’s ports, blame each other for being involved in corruption. The ANSA accuses that TCRC is a disqualified firm and it has used government connections to win the contract of quality control of gas and oil in Afghan ports but TCRC blames the ANSA of being mired in corruption. The two signatory sides are exploiting some blurred lines to accuse each for suspension of gas and oil quality control in Afghan ports.         

Though a contract on quality control project of gas and oil, imported through the country’s ports, was signed around six months ago, quality control project suspended for ambiguities reasons and differences between the signatory sides. Official documents obtained by Kabul Now suggest that the contract has been suspended by Afghanistan’s parliament and council of ministers until resolution of the differences and clearance of the ambiguities. The signatory sides are Afghanistan National Standard Authority (ANSA) and an Indian company, the Therapeutics Chemical Research Corporation (TCRC). Of the country’s six ports, the TCRC has recently received laboratory facilities for Hairatan port, which was followed by criticism by the Afghan MPs.  

According to Khawaja Jawid Sediqi, technical deputy chairman for ANSA, the differences still remain unresolved.

Speaking on condition of anonymity, sources familiar with the process told Kabul Now that there are a number of “deficiencies and ambiguities” in procurement process of the contract signed between the TCRC and ANSA. These sources claimed that the TCRC wants to start its operation in the area through “political connections, pressure, and threats.”

The signatory sides have differences over investment, price, revenues, expenditure and provision of laboratory equipment and land for facility setup. Sources from both sides, who requested not to be named, accused each other of corruption and violating rules and regulations.

This table shows the amount of money the two signatory sides have to invest.

Admitting that there are some differences, ANSA authorities alleged that parts of the content of the contract is not clear on areas of investment and service delivery, which according to them, are the main challenges ahead of this national project.

The TCRC says it will invest within three to six months but the ANSA argues that the firm, as per the contract, is required to invest the five million dollars and then it can obtain laboratory facilities in all ports. But the contract obliges, as he claims, that signatory firm to invest around five million USD in the area, and as per the contract, the ANSA has to provide the firm with laboratory equipment worth six million USD. As Sediqi claims, the TCRC firm is reluctant to invest five million USD.   

Keramatullah Keramat, administrative manager at the TCRC, however, argues that the firm is not necessarily bound to invest at the early stage of the project. The firm will invest within the stage of “first six months”, he underlines.  Mr. Keramat claims that the ANSA, mired in corruption in the country’s ports, hesitates to hand over quality control task to the TCRC. Based on his accounts, laboratory facilities are mostly defective and unable to check and test the quality of goods imported to Afghanistan.  “Our assessments in Aqina and Hairatan ports suggest that machineries are all damaged and cannot do credible testing. These laboratories might not worth more than a million USD,” he claimed.

A source who asked not to be named, meanwhile, accused the TCRC to have obtained permission to conduct quality control testing in Hairatan ports by “political pressure and threats”. “[The TCRC] has made an income of USD 300,000 only within 15 days without any investment. This amount has been poured into the firm’s account without any accountability measure required by the contract,” the source claimed, adding that the TCRC has done testing with government’s equipment.

Keramat says that they would invest within three or six months after start of their work and install new machines. He further claims that the ANSA hesitates to hand over the ports to them despite they have made some primary investments and sent their investment plan to the authority. Noting that they have spent millions of dollars on the project so far, the TCRC manager warned that they will register complain against the Afghan government if the authorities do not lift suspension of the project.  

“The ANSA has not cleared its balance with the previous contracting firm, GEO CHEM MIDDLE EAST. This is why it hesitates and does not act transparently on pricing the machines and handing them over to us,” Keramat asserted, blaming the ANSA and previous contracting firms of corruption in the ports.

Sources in the TCRC, who spoke on condition of anonymity, claimed that around 40 million afghanis are being paid by the traders as bribes to the country’s ports officials on daily basis. “Every tanker and truck carrying oil and gas are charged for USD 150 bribes on daily basis,” the source added.

The quality control of imported oil and gas has been always under criticism by MPs and local authorities. But the ANSA’s department in Herat asserted last year that it had returned 50 vehicles only in a single month for they were carrying low- quality gas and oil. According to the authorities, around 200 vehicles carrying oil and gas were entering Afghanistan through the port on daily basis.

Sediqi admitted that there were corruption in previous process of quality control and that the [balance] of the previous signatory firm, GEO CHEM MIDDLE EAST, was not cleared yet. “We try to ensure transparency and protect national interest this time. There have been some corruption in the previous contract. We don’t want to continue the work as did in the previous contract,” the ANSA official noted, adding that the previously signatory firm is now on the ANSA’s black list.

Though the GEO CHEM MIDDLE EAST had been awarded a five-year contract term on providing quality control service of the imported oil and gas, the firm has continued its work more than the period of the contract—for seven years (1391-1397). The project was re-announced for bidding in mid-1397. Contrary to officially defined procedure, the bidding process lasted for a year in which the TCRC was finally announced as winner and the contract was awarded to it on December 09, 2019.

Commenting on differences and ambiguities existing in contents of the new contract, Sediqi blames that the National Procurement Authority (NPA) and former officials of the ANSA have hands in ambiguities in the contents.

“Upon signing the contract, authority of controlling quality of gas and oil was given to us just two months before signing the contract but we faced a decision which was already made. The National Procurement Authority decided to sign the contract which we did so,” he asserted.

In a written reply to Kabul Now, the NPA has asserted that the ANSA is responsible for all stages of the project, the main party to the contract, and also in-charge of implementing the project. The NPA says that it has only a facilitating role for procurement affairs.

Suspension of contract

In a report to the council of ministers meeting held on February 19, 2020, the ANSA has accused the TCRC of exerting pressure on the authority through “different political and non-political means.” The ANSA’s report stipulates that the TCRC must invest, purchase, and install modern laboratory equipment before getting laboratories of the ports from the government.

Confirming the ANSA’s report in the meeting, the council of ministers has asked the authority to hand over the quality control of the imported oil and gas to the TCRC after the firm fulfills all requirements; invest, purchase and install standard labs in the ports.

In addition to the differences and ambiguities, the TCRC’s legal status and the procurement process of the project is under investigation by the Afghan parliament. Nearly a month after the contract was awarded, the Parliament’s committee on economic affairs has suspended the contract, asking the ANSA and NPA to officially report to the committee regarding the issue.

In another decision, made by the Parliament’s committee on justice and judicial affairs on February 13, 2020, a delegation was appointed to assess the contract process. According to the committee’s letter, the delegation has found that the contract has been awarded in contradiction with the President’s decree, laws, and the country’s national interests. “The firm’s documents seem to be fake and the contract has been awarded in cooperation with some government institutions,” it further noted.

Though the Parliament has yet to complete its investigation over the case, MP Homayoun Shahidzadah, who is a member of the committee on justice and judicial affairs, also confirmed that the TCRC’s documents are fake.

The MP said that they have studied 300 to 400 related documents and that some authorities, who are suspected to have involvement, would be introduced to justice and judicial organs once the investigation is over.   

Mohammad Rahim Aliyar, an MP, blamed ANSA for handing over some ports to the TCRC despite the contract was suspended.

The TCRC’s manager, Keramat, rejected any political pressure, noting that the Parliament could not suspend their operation without the President’s decree. As he claimed, the TCRC has invested dozens of millions of dollars over past two years, and they would complain to international institutions if the project would not be awarded to them.

However, in a written reply, the NPA argues that if the national interests is not secured in the contract, the ANSA must be held accountable since the authority is responsible for developing responsibility description of the firm, the tender, and contents of the contract. According to the NPA, the project was approved by the Independent National Procurement Commission chaired by President Ghani after undergoing five-time assessments in the commission.

Before signing the agreement and after the TCRC’s documents were assessed by the Ministry of Foreign Affairs, President Ghani had instructed that the firm should not be awarded work permit. It further says that in case it creates trouble, then, the firm should be introduced to the Attorney General’s Office. In an official letter issued on November 18, 2019, Office of Chief of Staff to the President informed the Ministry of Industry and Commerce (MoIC) regarding the President’s instruction and assessment of the Ministry of Foreign Affairs.

Official documents suggest that the MoIC has mistakenly given a license certificate in area of assessing the quality of oil and gas for the TCRC while the firm introduced itself as a commercial firm based in the United Arabic Emirate (UAE). After a while, the MoIC realizes its mistake and officially reports to different government institutions to limit the operation of the TCRC in areas of assessing oil and gas quality control.

According to the letter of the Office of Chief of Staff to the President, Afghanistan’s Embassy in the UAE has also found that the TCRC has the license certificate for Business Consultancy Services in Sharjah, not for assessing and quality control of oil and gas.

Despite all such legal barriers, the TCRC has participated in the project’s bidding process in 1397/2018. To extend its license, the firm has again referred to the MoIC in 1398. This time, the ministry has extended its license for three years due to the TCRC’s operations in areas of providing oil and gas lab services in India.

The extension is directly in contradiction to the ministry’s legal department’s decision made on September 14, 2019, that says the TCRC’s license must not be extended if the firm is found that it has not any gas and oil operation in the UAE. According to the MoIC, since the TCRC was introduced from its branch in the UAE, the branch also needs to have gas and oil related operation, in a bid to be eligible for having the license.

A report by the MoIC says that the TCRC have exerted political pressure in order to extend its license through call from some figures based in the United States and mobilizing 25 members of provincial councils from different provinces.

The MoIC, however, avoids to comment how it has resolved the legal issues of the TCRC’s oil and gas operation in Afghanistan.

Rejecting findings of Afghanistan Embassy in UAE, the TCRC’s manager, Keramat, says that the firm is headquartered in India and holds 28 branches in different countries, including in the UAE, which are all operating in the area of providing lab services for oil and gas quality control. He adds Afghanistan Embassy in India has approved required legal documents of the TCRC which provided the company with required legal eligibility to extend its operation permit in Afghanistan.

According to the NPA officials, the national procurement commission in a meeting chaired by the President on December 02, 2019, decided that ANSA was obliged to sign the contract with the TCRC within four days after the issue was discussed in five separate meetings of the commission. Following the commission’s decision, the ANSA signed the contract on December 09, 2019.

Meanwhile, ANSA’s deputy chairman, says that the authority has not been involved in the contract process and has acted only in accordance with the NPA decision. “Neither we were involved, nor are we responsible for it. The national procurement authority must respond,” he noted, adding that they have yet to receive their response from Afghanistan embassy in India about legal documents of the TCRC. Based on his account, India’s ambassador whose presence was required in the signing ceremony, according to the NPA decision, was not present during the signing ceremony either.

The TCRC’s official, however, claims that the procurement process which was controversial has now been resolved after Afghanistan’s Embassy in India endorsed the TCRC’s documents for the NPA and the MoIC.

Sources in ANSA, who spoke on condition of anonymity, said that the new contract was against the country’s “national interest” and hugely advantageous for the signatory firm. According to the source, the required investment level set in the contract and the revenue amount of the project for the firm was not proportionate. The source further revealed that the government’s share in the project was set 27 percent which is fewer than the profit goes to the firm which will invest six million dollar.

The source estimated the project’s annual revenue more than USD 20 million which means its total revenue would be over USD 100 million in five years. The source further said that the project’s revenue through illegal means was even more than USD 300 million, adding that the project’s annual expenditure was around 20 million afghanis.

Meanwhile, the TCRC’s manager, rejected the revenue amount claimed by ANSA’s authority. Keramat of the TCRC added that the total revenue of the project was estimated around USD 30 million.

The TCRC has won the project by offering a 27 percent profit for the Afghan government which has been the highest amount offered among the bidders. But sources told Kabul Now that test rates have increased by 60 to 70 percent in the interest of the TCRC in the new contract. Officials at the TCRC, however, alleged that the test rates have increased proportionately for the number of tests required to be conducted which needs more employees, specialists, and time.

This report has been developed by Etilaat-e-Roz’s Liyaqat Layeeq and has been translated into English by Mokhtat Yasa.