Ntemi Kazwile
JF-Expert Member
- May 14, 2010
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By Staff writer
30th May 2010
TRL locomotive
Today, we are asking this question after last weeks revelation that the India-based firm, Rites, is demanding a total of Sh177 billion as the cost of ending the deal it sealed with the Tanzanian government about three years ago.
As the government continues to negotiate with Rites, the question that begs an urgent answer is; how much did Rites invest in Tanzania Railways Ltd ?
But while Rites has cornered the government with over seven key demands which, together, totals Sh177 billion, The Guardian on Sunday has established that the company didnt invest a single shilling during the controversial acquisition of TRL. The truth is that the Indian firm expected to use the TRLs shares and assets it acquired dubiously in order to borrow $400 million from International Finance Corporation the lending arm of the World Bank.
Reaping where they didnt sow
The Indian based firm, 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, and managed to dubiously win the 40 year deal to manage the Tanzania Railways Ltd.
After three years later, the deal has gone sour, the government has expressed its interest to buy back shares from Indian firm at undisclosed amount a move aimed at rescuing the cash strapped TRL.
But the question that puzzles many here is how much did Indian firm invest to acquire the 51 percent share? Though the government is reluctant to disclose what the Indian firm paid to acquire the majority shares in TRL, the leaked details show that Rites didnt invest any single shilling during its process to acquire the state owned firm.
According to well placed source within the Ministry of infrastructure, the Indian firm wanted to use the TRL assets as a collateral to borrow close to $400million as a capital to revive the company, but the plan hit a snag in last minutes.
They (Rites) invested zero, but are now demanding compensation of billions of shillings as well as forcing the government to buy back 51 percent sharesthis is purely daylight robbery. A senior official currently attending the ongoing talks between the government and Rites, told The Guardian on Sunday this week.
Speaking under the conditions of anonymity, the official added, We are puzzled by some of these demands because the truth is that Rites didnt pay anything to acquire the majority share.
They have failed to perform but insist that the government should buy back the shares. The official added
Rites among other things, wants the government to pay close to $87million as the price of buying back the majority share, which the company acquired freely.
The Guardian on Sunday has learnt that Rites hasnt paid concession fees to the government of Tanzania since the start of the concession agreement.
Though the government announced this week that it would fully own and operate the cash strapped TRL, the Indian firm is sticking to its gun, insisting that the government should pay compensation and other charges amounting to over $124 million because of unlawful termination of contract.
Key tough issues
Alarmed by the financial report presented by Rites, the governments negotiation team this week asked for an independent auditor to verify the books of accounts, before any compensation deal is reached.
But according to our source, the Indian firm has strongly rejected the move, insisting that what it presented was correct and should be used as the basis for any compensation agreement.
If they believe their internal audit report is accurate, its then amazing to hear that they are not ready for any external audit report The official told The Guardian on Sunday.
You cant demand compensation using a one sided internal audit reportthis is not fair and I will be surprised if the government will agree to proceed without verifying the financial report. The official further added.
Zero value locomotives
The Guardian on Sunday has also established that the locomotives and coaches that Rites wants the government to buy at the cost of $12.68million plus an interest rates of late payments amounting to $1.3million.
This was another burning issue that arose during the talks which started early this week.
The Guardian on Sunday reported exclusively early last year that the contract signed by the two sides 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.
SOURCE: GUARDIAN ON SUNDAY
Hii ndiyo Tanzania zaidi ya uijuayo
