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Revealed: TRL`s lost Sh40 billion

Discussion in 'Habari na Hoja mchanganyiko' started by Kiwi, Oct 4, 2009.

  1. Kiwi

    Kiwi JF-Expert Member

    #1
    Oct 4, 2009
    Joined: Sep 30, 2009
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    [​IMG]
    One of the leased locomotives:
    The amount of money that Rites is charging to lease used locomotives and wagons over five years could buy ten brand new locomotives and 48 new passenger coaches.(PHOTO: EDWIN MJWAHUZI)



    ‘The amount of money the Indian firm is charging to lease used locomotives and wagons over five years could buy ten brand new locomotives and 48 new passenger coaches’

    It swept into the country under the guise of a serious investor ready to pour billions of shillings into saving the former Tanzania Railways Corporation (TRC)—which in 2006 was at the brink of collapse, thanks to the poor management of the State-owned firms that clouded the post-socialism era of the 1990s.
    But the Indian-based firm, Rail India Technical and Economic Services Ltd (Rites), seems more likely to have taken advantage of the TRC's vulnerable situation, dubiously winning the tender to acquire a majority share in what is now known as Tanzania Railways Ltd (TRL) and then hiring itself to supply used locomotives and passenger cars at costs higher than the price of brand new equipment.
    Now nearly three years later, the deal has gone sour and Rites has issued a 60-day ultimatum to the government stipulating that if the government does not pay the $30.2million for hiring the locomotives and wagons, the Indian firm will walk.
    But as the two sides continue to fight over the billions, fresh details show that the contract signed was clearly in Rites' favour, as the Indian firm managed to lease 23 used passenger coaches for a price that could have bought 20 brand new wagons.
    In the leasing agreement for the 23 coaches, seen by The Guardian on Sunday, TRL should pay $5,765,300 over five years, including lease charges of $3,255 per coach per month for five years and maintenance and spare charges of $450,000 per year.
    According to a senior engineer currently working with TRL, a new passenger coach bought outright could cost about $250,000 depending on the type and country of origin. Most of the passenger coaches currently used by the Tanzanian railway were made in England and Sweden.
    According to the contract, TRL was to pay an extra $4,491,900 in leasing charges for the coaches over the five-year period, as well as $823,400 in freight and insurance charges for the coaches from India to Tanzania.
    This amount could have purchased another 17 brand new coaches—enabling the TRL to own at least 37 wagons, rather than lease just 23—with carriage capacity of 5,550 passengers.
    The Guardian on Sunday has also reliably learnt that the $10.42 million that Rites is demanding for leasing 25 YDM4 locomotives for a two -year period is enough to buy the same number of new locomotives at a price of $1.8 million per locomotive depending on the power.
    To put it simply, the amount of money that Rites is charging to lease used locomotives and wagons over five years could buy ten brand new locomotives and 48 new passenger coaches, which if they were bought outright rather than leased would give the railway the added collateral benefit.
    But curiously, TRL was instead dragged into the controversial contract to lease the used locomotives, some as old as 48 years, which according to experts are very expensive to operate due to their massive fuel consumption.
    The 73R XX locomotives leased have 1200 horsepower and were manufactured in 1951, whereby their fuel consumption stands at five litres of diesel per kilometer. Tanzania's railways were designed for 89xx class locomotives with 2000 horsepower.
    Speaking on condition of anonymity, a senior TRL engineer told The Guardian on Sunday that there are 34 88xx class locomotives manufactured in 1992 that belonged to the defunct TRC, in addition to nine 89xx class locomotives of the same year.
    Those 43 locomotives would be enough to revamp rail transport in the country, the engineer said.
    Comparatively, he said the Rites-leased locomotives had far greater fuel consumption. Just one of the ‘fuel guzzlers’ uses 3,500 litres of diesel to travel from Tabora to Kigoma and since they always operate in pairs, both consumed at least 14,000 litres of diesel on a round trip journey, he said.
    TRC's original locomotives use just 4,000 litres of diesel for the same trip.
    “The government blindly entered into a contract that if not seriously taken care of will kill the railways services in the country. One of the leased locomotives can only pull a few passenger coaches as two of them combined pull 12 passenger coaches,” he said, adding that a single locomotive among those already owned by the government can pull up to 17 passenger coaches.
    The Guardian on Sunday also learnt that Rites, because it has a majority share in the railway, was able to choose TRL's management, allowing it to stack the top ranks with Rite officials.
    According to the contract, TRL was forced to pay a freight charge of $35,000 per passenger coach from India to Dar es Salaam. But a quotation obtained by The Guardian on Sunday from one of the marine transporters in Dar es Salaam shows that the firm would have charged $18,000 per wagon.
    Inside the shoddy contract
    In September 2007 a leasing contract agreement between Tanzania Railway Ltd (TRL) as lessee and Rail India Technical and Economic Services Ltd (Rites) as lessor for leasing 25 YDM4 locomotives was signed by TRL Managing Director A. Jayaran and Sumit Sinha, Rites Executive Director (Expotech) in the presence of Sawjay Misra, TRL executive director, and Amitabh Sinha, Rites general manager.
    The five-year $31,777,850 (Sh42,582,319,000 at the current exchange rate of Sh1,340 to a dollar) contract prize agreement included lease charges of $107,800 (Sh144,452,000) per locomotive per year and maintenance charges of $128,700 (Sh172,458,000) per locomotive per year.
    The agreed wet leasing charges must be paid by TRL to Rites towards the hiring charges and maintenance charges per locomotive taken on a two-year lease, while freight and insurance charges must be paid in advance for each shipment agreed to be subject to adjustments.
    The wet leasing charge of a locomotive for one year is $236,500 (Sh316,910,000) meaning that wet leasing charges of 25 locomotives for five years stand at $29,562,500 (Sh39,613,750,000), according to the contract, with the total wet leasing charges of contract agreement for 25 locomotives for five years at $30,213,700 (Sh40,486,358,000).
    Apart from these charges there is also the cost of modifying 16 of the locomotives for $651,200, with $35,000 as estimated one-way freight per one locomotive from India and Dar es Salaam, subsequently placing freight for 16 locomotives at $1,120,000 and nine locomotives already in Tanzania then at $315,000, totaling freight charges of $1,435,000.
    Included in the contract are marine insurance for the 16 locomotives at $100,800 and marine insurance for nine locomotives from Dar to India at $28,350. The total freight and marine insurance stands at a staggering $1,564,150.
    On safety, the agreement says: “The lessee shall be wholly responsible for any loss or damage to life, property and to the leased locomotives, on account of failure to comply with the instructions of operations and load restrictions.”
    It adds: “The lessee will be responsible to meet and pay for all claims arising out of any loss of life and property as per existing rules of the lessee for payment of compensation to person(s)/parties involved. The lessee shall suitably compensate the lessor in case of the leased locomotive is involved in any mishap during the period the loco is under the lessee’s custody.”
    In the event that a locomotive is damaged in a collision or derailment to such an extent that it cannot be repaired in Tanzania, the contract stipulates: “The hire charges for the damaged locomotive will terminate at midnight on the date of the derailment/collision and the locomotive must be returned to India at the cost of the lessee.”
    Other terms and conditions of the agreement indicate that in case of termination of the contract before expiry of the lease period of five years, a notice of three months is required to be given by either party.
    “In the event that the parties are unable to resolve any differences relating to the interpretation or the effect of Force Majeure, then the parties agree to seek resolution of their differences by resorting to arbitration” in an amicable manner in a spirit of cooperation.
    “Any unresolved dispute or difference shall be arbitrated, in accordance with international practice.”
    Although in the initial contract it was agreed that Rites would start delivering 16 locomotives within four months after signing the contract and a mobilization advance being made available, an addendum changed the clause to read: “The delivery of (16) locomotives shall conclude within twelve months of receipt of upfront payment.”
    The upfront payment towards the cost of mobilization was $2,087,725 (Sh2,797,551,500) but yet another addendum stipulated that the upfront payment be paid in three installments one month before each lot of locomotives was shipped from India.
    The suggested tentative dates of shipment of the lots were October 25, 2007, for the first lot, with a payment of $727,725, and December 25, 2007, for the second lot that required an upfront payment of $680,000.
    The third lot was to be shipped on February 15, 2008, with an upfront payment of $680,000.
    The contract categorically stipulates that the upfront payments are not refundable in case of any premature termination or cancellation of the leasing agreement for any reason whatsoever.
    The payment for the dry lease would commence with $1,247,995 as an upfront payment towards the cost of mobilisation to RITES within two weeks of signing the contract. This payment is also not refundable in case of any premature termination or cancellation of the leasing agreement for any reason whatsoever.
    The contract states that the balance of $4,267,305 shall be paid in two monthly installments. Just like the agreement in leasing locomotives, this contract states that the lessee will be responsible to meet and pay for all claims arising out of any loss of life and property as per existing rules of the lessee for payment of compensation to person(s)/parties involved.
    The lessee shall suitably compensate the lessor in the event that the leased locomotive is involved in any mishap during the period that it is under the lessee’s custody.
    The agreement shows that the lease charges must be paid by the lessee regularly, even if the coaches are not in service.




    SOURCE: GUARDIAN ON SUNDAY


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