MNCs reluctant to offer wheat to STC
Large MNCs have blamed STC for their reluctance to offer wheat to the PSU.
By Nidhi Nath Srinivas, TNN |
NEW DELHI: Large MNCs have blamed STC for their reluctance to offer wheat to the PSU. According to them, STC has yet to pay foreign companies around $20 million as penalty for not unloading their wheat cargoes at port on time last summer. With their claims not settled yet, global trading giants are wary of coming to the table again.
Internationally, demurrage/despatch claims are swiftly settled routinely between buyers and sellers. However, India has yet to evolve such a mechanism for its global tenders. MNCs now say any price they quote in the new tenders will include an extra-large risk premium over and above the routine India risk premium.
When contacted, STC CMD Arvind Pandalai said it is a procedural issue. “All these contracts have a period within which claims have to be settled. This period is not yet over. It takes time for facts and claims to be verified. It means a lot of paper work. We are handling it. No one has complained to me yet. So I’m not aware of any such views,’’ he said.
He also dismissed any apprehension of getting quotes higher than market price. “We will evaluate at the time of receiving quotes. I don’t foresee any issues,” he said.
Most wheat suppliers who sold to India through a contract with STC last year faced congestion at Kandla and Mundra ports. Since the cargoes were not offloaded on time, vessel owners demanded demurrage for the extra days their ships were kept waiting. Under the contract terms, STC had to bear the demurrage costs in the event of delays.
“Since the delays were on account of STC, the bills have to be paid by it. But till now there is complete silence on it,” said the CEO of an MNC which participated in two tenders last year. “As we understand it, the problem apparently is that since STC bought the wheat on behalf of FCI, it is waiting for FCI to fork out the extra cash. But we are not sure of the status now,’’ said the MD of
Usually, in a commercial situation, the buyer and seller go for arbitration if there is an impasse on contract terms. However, with a PSU as buyer, MNCs say they are finding it difficult to take legal recourse. “Given the current situation, taking legal action will push back recovery by another couple of years. No foreign company sees the logic of waiting that long when they have met all their own contractual obligations,’’ he added.
nidhi.srinivas@timesgroup.com
Internationally, demurrage/despatch claims are swiftly settled routinely between buyers and sellers. However, India has yet to evolve such a mechanism for its global tenders. MNCs now say any price they quote in the new tenders will include an extra-large risk premium over and above the routine India risk premium.
When contacted, STC CMD Arvind Pandalai said it is a procedural issue. “All these contracts have a period within which claims have to be settled. This period is not yet over. It takes time for facts and claims to be verified. It means a lot of paper work. We are handling it. No one has complained to me yet. So I’m not aware of any such views,’’ he said.
He also dismissed any apprehension of getting quotes higher than market price. “We will evaluate at the time of receiving quotes. I don’t foresee any issues,” he said.
Most wheat suppliers who sold to India through a contract with STC last year faced congestion at Kandla and Mundra ports. Since the cargoes were not offloaded on time, vessel owners demanded demurrage for the extra days their ships were kept waiting. Under the contract terms, STC had to bear the demurrage costs in the event of delays.
“Since the delays were on account of STC, the bills have to be paid by it. But till now there is complete silence on it,” said the CEO of an MNC which participated in two tenders last year. “As we understand it, the problem apparently is that since STC bought the wheat on behalf of FCI, it is waiting for FCI to fork out the extra cash. But we are not sure of the status now,’’ said the MD of
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another MNC. Usually, in a commercial situation, the buyer and seller go for arbitration if there is an impasse on contract terms. However, with a PSU as buyer, MNCs say they are finding it difficult to take legal recourse. “Given the current situation, taking legal action will push back recovery by another couple of years. No foreign company sees the logic of waiting that long when they have met all their own contractual obligations,’’ he added.
nidhi.srinivas@timesgroup.com
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