CCP Rejects Complaint Against KP Agricultural Engineering for an Anti-Competitive Tender

The Competition Commission of Pakistan (CCP) has passed an order disposing of the matter against Khyber Pakhtunkhwa Directorate of Agriculture Engineering for alleged violation of Section 3 & 4 of the Competition Act, 2010; whereby the restrictive trading conditions are imposed in its tender for procurement and installation of ‘Deep Solar Pumping Systems on Agriculture Tube-wells/open-wells.’

Earlier, Catkin Engineering had sent a formal complaint to the CCP alleging that KP Directorate of Agriculture Engineering had included certain unfair trading conditions in the tender for procurement and installation of Deep Solar Pumping Systems on Agriculture Tube-wells/open-wells, thus making the tender anti-competitive and in violation of Section 4 of the Competition Act.

As per the complainant, the Directorate in its tender required the firms to have registration with Khyber Pakhtunkhwa Revenue Authority (KPRA);

  • Must have Rs. 200 million average turnover for the last three years in solar pumping systems;
  • Should have experience of projects of similar and complex nature worth Rs. 10 million completed in the last five years;
  • Should have a testbed for verification/testing of solar pumps along with all accessories as per ISO 9906 in company premises (firm must have third party certification regarding testbed arrangements).

The CCP’s inquiry examined all the clauses separately to see whether there was any violation of the Competition Act or not. In its order, the CCP’s bench stated that the complainant had failed to establish any violation of the Competition Act in the tender.

Regarding the first condition, the order stated that registration with KPRA is the same as obtaining a National Tax Number (NTN) from the Federal Board of Revenue (FBR) i.e. a person/entity does not have to be actually paying any taxes to obtain an NTN. It also observed that registration with KPRA can be done online through its website. Therefore, it appears that this clause does not adversely impact competition.

Regarding the second condition of Rs. 200 Million average turnover requirement, the order stated that the PEC recommendation is for the firm to maintain an average turnover over a five-year period.

However, the bidding document requires turnover to be maintained over a three-year period which appears to be less stringent since it would be easier for a firm to maintain a certain level of sales over 3 years rather than five years. Therefore, this clause does not appear to impede competition.

The order noted, that the burden of proof rests with the Complainant who has failed to substantiate as to how the impugned clause is restrictive of competition and the condition about Rs 10 million worth of projects in last five year does not appear to be anti-competitive as the value of the project is much bigger.

Moreover, the condition of having the testbed facility on the company premises appears to be unnecessary and the Khyber Pakhtunkhwa Directorate of Agriculture Engineering has failed to provide a satisfactory answer as to why 13 marks were assigned for this requirement.

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