From the Guardian News Paper
The dubiousness of the Tanzania Railways Limited (TRL) contract caused by recklessness within the government's negotiating team may cost the tax payers a whopping $124million (Sh177.56billion), following the move to terminate the failed deal, The Guardian on Sunday has learnt.
This follows fresh demands by Rail India Technical and Economic Services (RITES) of $ 87 million from the government in sales of its stake in TRL and payment of several services provided by the company.
According to a reliable source within the Ministry of Infrastructure Development, the delegation from India is expected in the country this week for negotiations with the government on how to terminate the contract between the two parties.
On the list of the Indian tycoons whopping demand is $15million as compensation/transaction expenses for their smooth exit, after the company fell out with the government three months ago.
The list doesn't end there. Among other things, RITES also wants the government to pay another $12.68million as rental/lease charges for leasing of old coaches and locomotives, plus an interest on late payment of $1.3 million.
Taking the advantage of loopholes contained in the contract signed by the two parties, the Indian based company demands further amount for rehabilitation of locomotives amounting to $16 million, while it didn't do any major rehabilitation during the last 3 years of their management of TRL.
The company is also claiming a total of $2.36 million towards interest on their outstanding payment from Government according the list of demands seen by The Guardian on Sunday.
Our efforts to get the minister for Infrastructure Development for comment on the matter was futile as his phone went unanswered. But when contacted, the Permanent Secretary, Engineer Omar Chambo, simply said; "Why do you people like meddling in government matters".
He declined to comment on the issue, adding "If you have heard that they are coming, let them come."
The 25-year railway management agreement between Tanzania and Rites was officially revoked in February and the government said both parties would hold talks on acquisition of Rites shares by the government.
Minister for Infrastructure Development, Shukuru Kawambwa told the parliament last month that the government was expected to acquire Rites shares by the end of this month after discussions with the foreign investors.
According to the government, the concessionaire "underperformed" in the subsequent two years, falling short on financial commitments and failing to get the system back in working order. In August 2009, Rites demanded payment of $10.42 million to cover the lease of 25 locomotives and 23 passenger coaches imported from India in order to revive passenger services. Failing settlement, it threatened to send the rolling stock back to India.
TRL was to pay in five-years, $31,777,850 (Sh42,582,319,000 at the current exchange rate of Sh1,340 to a dollar) for a contract prize agreement that 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.
The company is now claiming towards rental/lease charges for leasing of old coaches and old locomotives, almost $12.68 million, plus interest on late payment of $1.3 million.
The Guardian on Sunday has reliably learnt that RITES has sent a proposal to the government to sell its stake in TRL and amount payable to RITES under various services provided by RITES to TRL which is totaling $87 million.
This proposal is sent at a time when TRL is almost on the brink of bankruptcy due to mismanagement of TRL by RITES and also leasing of 40 year old locomotives by RITES to TRL at very high lease rentals.
It is claiming amount for rehabilitation of locomotives amounting to $16 million while they have not done this rehabilitation during the last 3 years of their management of TRL.
"Against RITES exit, the company claims a total of $87 million as of December 31, 2009. This is payable from tax payers' money, and as they have driven the company to bankruptcy, RITES is fully responsible as a major shareholder, " said the source who preferred anonymity.
In addition, RITES is also claiming a total of $2.36 million towards interest on their outstanding payment from the government.
While the company has laid demands to the government, insiders say RITES has not paid Concession Fee to the government since the start of the Concession Agreement two years ago.
It has also been revealed that the company now plans to sell the old locomotives and old coaches, including spares, which are almost 40 years old to the government at high prices. But the company that now demands lots of money has not been paying salaries on time and after privatisation of TRC, leaving the government to pay staff expenses, including salaries and other benefits for all these years of all TRL employees.
Doomed from the beginning
RITES 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.
Knowing what we know today, 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.
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 dubiousness of the Tanzania Railways Limited (TRL) contract caused by recklessness within the government's negotiating team may cost the tax payers a whopping $124million (Sh177.56billion), following the move to terminate the failed deal, The Guardian on Sunday has learnt.
This follows fresh demands by Rail India Technical and Economic Services (RITES) of $ 87 million from the government in sales of its stake in TRL and payment of several services provided by the company.
According to a reliable source within the Ministry of Infrastructure Development, the delegation from India is expected in the country this week for negotiations with the government on how to terminate the contract between the two parties.
On the list of the Indian tycoons whopping demand is $15million as compensation/transaction expenses for their smooth exit, after the company fell out with the government three months ago.
The list doesn't end there. Among other things, RITES also wants the government to pay another $12.68million as rental/lease charges for leasing of old coaches and locomotives, plus an interest on late payment of $1.3 million.
Taking the advantage of loopholes contained in the contract signed by the two parties, the Indian based company demands further amount for rehabilitation of locomotives amounting to $16 million, while it didn't do any major rehabilitation during the last 3 years of their management of TRL.
The company is also claiming a total of $2.36 million towards interest on their outstanding payment from Government according the list of demands seen by The Guardian on Sunday.
Our efforts to get the minister for Infrastructure Development for comment on the matter was futile as his phone went unanswered. But when contacted, the Permanent Secretary, Engineer Omar Chambo, simply said; "Why do you people like meddling in government matters".
He declined to comment on the issue, adding "If you have heard that they are coming, let them come."
The 25-year railway management agreement between Tanzania and Rites was officially revoked in February and the government said both parties would hold talks on acquisition of Rites shares by the government.
Minister for Infrastructure Development, Shukuru Kawambwa told the parliament last month that the government was expected to acquire Rites shares by the end of this month after discussions with the foreign investors.
According to the government, the concessionaire "underperformed" in the subsequent two years, falling short on financial commitments and failing to get the system back in working order. In August 2009, Rites demanded payment of $10.42 million to cover the lease of 25 locomotives and 23 passenger coaches imported from India in order to revive passenger services. Failing settlement, it threatened to send the rolling stock back to India.
TRL was to pay in five-years, $31,777,850 (Sh42,582,319,000 at the current exchange rate of Sh1,340 to a dollar) for a contract prize agreement that 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.
The company is now claiming towards rental/lease charges for leasing of old coaches and old locomotives, almost $12.68 million, plus interest on late payment of $1.3 million.
The Guardian on Sunday has reliably learnt that RITES has sent a proposal to the government to sell its stake in TRL and amount payable to RITES under various services provided by RITES to TRL which is totaling $87 million.
This proposal is sent at a time when TRL is almost on the brink of bankruptcy due to mismanagement of TRL by RITES and also leasing of 40 year old locomotives by RITES to TRL at very high lease rentals.
It is claiming amount for rehabilitation of locomotives amounting to $16 million while they have not done this rehabilitation during the last 3 years of their management of TRL.
"Against RITES exit, the company claims a total of $87 million as of December 31, 2009. This is payable from tax payers' money, and as they have driven the company to bankruptcy, RITES is fully responsible as a major shareholder, " said the source who preferred anonymity.
In addition, RITES is also claiming a total of $2.36 million towards interest on their outstanding payment from the government.
While the company has laid demands to the government, insiders say RITES has not paid Concession Fee to the government since the start of the Concession Agreement two years ago.
It has also been revealed that the company now plans to sell the old locomotives and old coaches, including spares, which are almost 40 years old to the government at high prices. But the company that now demands lots of money has not been paying salaries on time and after privatisation of TRC, leaving the government to pay staff expenses, including salaries and other benefits for all these years of all TRL employees.
Doomed from the beginning
RITES 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.
Knowing what we know today, 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.
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.
