ACC ends probe into gypsum export scandal

The Anti-corruption Commission has found no evidence to indicate collusion and undue price fixing in the export of gypsum

Staff Reporter

In accordance with the established principles of due process and natural justice in dealing with complaints and deciding appropriate next course of action, the Anti-Corruption Commission (ACC) formally launched an investigation on 12 March 2021 regarding alleging possible collusion and undue price fixing in the export of gypsum to Nepal.

According to the ACC, the ACC received a complaint, via email on 20 December 2020, against Kumar Pradhan, Marketing Specialist and Sangay Rinzin, Director of Marketing & Logistics of State Mining Corporation Limited (SMCL) alleging possible collusion and undue price fixing in the export of gypsum to Nepal.

The complaint alleged that the two officials were directly involved in fixing the price of gypsum thereby enriching themselves by receiving the difference money from the importers/syndicates from Nepal.

The ACC also received two additional information on illegal collection of money through a transport agency, and siphoning of minerals’ revenue which amounted to billions in collusion by Sangay Rinzin on 8 January and 1 March 2021.

The investigation revealed that the Ministry of Economic Affairs, on 16 October 2018, authorized the SMCL to take over the operation of Khothakpa gypsum mining along with the infrastructure and staff of Druk Satair Corporation Limited (DSCL) for an interim period of two years with effect from 1 January 2019.

The mandate was assigned to SMCL primarily to ensure seamless business continuity, fulfill the requirements of the domestic industries and avoid loss of established market for Bhutanese gypsum, added the press release.

During the initial period of operations, the press release further states that the SMCL adopted the existing pricing structure for export of gypsum that was fixed by the DSCL to ensure seamless business operations.

Consequently, during the 27th Board Meeting of SMCL held on 23 November 2018, directed SMCL to further study the pricing structure of DSCL to determine actual price prices for export of gypsum were different for different markets irrespective of  distance for transportation of gypsum and continue domestic sales at the then existing rate.

Based on the market study and intelligence gathered by the SMCL, 33rd Board Meeting held on 19 December 2019, approved the proposed revised rates for gypsum export by approximately Nu 200 per metric ton and Nu 400 per metric ton for both Nepal and Indian Parties respectively in 2020.

“The investigation found that there is no involvement of these two alleged officials in determining the prices for export of gypsum since such decision-making authority entirely lies with the Board of Directors,” ACC states.

The major decisions of the company such as fixing mineral prices, providing strategic directions and maximizing the shareholders’ wealth and profitability of the company entirely lies upon the Board of Directors.

“Kumar Pradhan and Sangay Rinzin are neither a part of Board of Directors nor have any role in decision-making process but are just involved in operational functions of the company. Given their roles, there is no evidence to suggest their influence or involvement in price fixation to favor the Nepal parties,” it further elaborates.

Moreover, the investigation indicated that the rates of gypsum export to Nepal during DSCL has remained same at Nu 1,750 per metric ton during their operation for three consecutive years from 2016 to 2018.

“Rather the analysis reveal that the rates currently applied by the SMCL has increased progressively. It has in fact undergone continuous revision, since the time SMCL took over the Khothakpa gypsum mining, from Nu 1,750 per metric ton in 2018 to Nu 1,775 per metric ton in 2019 followed by Nu 1,975 per metric ton in 2020 and 2021,” it states.

Against the allegation on the total export of gypsum that is 1,989,000 metric ton in the last three years was found to be baseless as the total production of gypsum itself was approximately 905,153 metric ton in 2019 and 2020.

Of the total production in the last two years, the SMCL could only export 816,366 metric ton of gypsum and generated sales revenue of only Nu 1.559 Billion, which is far behind the amount (Nu 11.536 Billion) alleged as revenue lost to corruption.

Further, it states that SMCL’s business dealing with the importers is just limited to loading trucks, weighing and accordingly dispatching consignment as per Purchase order (PO)/Performa Invoice (PI) and LC (Letter of Credit).

ACC states that with regard to transportation of gypsum, it was found that local transporters like East Bhutan Private Ltd. (EBPL) directly engages with the importers concerned to arrange trucks to carry gypsum from Samdrupjongkhar stockyard or Rangia stockyard to the importer’s destination.

“SMCL has no dealings in the transportation of gypsum to the importers. Hence, the investigation further revealed that there is no involvement of above alleged two officials in transportation of gypsum,” the ACC findings reveal. 

In order to ascertain any possible illicit enrichment, the ACC thoroughly studied the assets and properties owned by Kumar Pradhan, Sangay Rinzin and their families.

However, the investigation did not find any incriminating evidence to prove disproportionate assets acquired through collusion with Nepal parties/syndicate in price fixing.

In view of the investigation findings, the ACC decided to stop further probe into the case. However, if new information arises in future, the ACC may decide to reactivate the case.

Notwithstanding the chain of events involved in establishing the facts, this case in point wherein the public sphere was inundated with baseless allegations calls for extra restrain for every individual or entity.

Meanwhile, in the last two months of investigation, the ACC has deployed 10 investigators led by the Director of Investigation besides information enrichment and comprehensive review and analysis on price fixation, assets and liability. A total of 30 digital items and 34 bank accounts were analyzed in addition to interview, interrogations and search & seizure operations.

“While it is critical to ensure the principles of accessibility, transparency and responsiveness in dealing with corruption complaints, it is equally important for the individuals concerned when exercising the fundamental responsibility to report corruption takes into account the larger socio-economic and political repercussions.”

Ensuing the above complaint, the ACC also investigated the allegation that EBPL is directly involved in transporting gypsum from Samdrupjongkhar stockyard without following any tendering process in collusion with Kumar Pradhan and Sangay Rinzin of SMCL. The investigation found that EBPL directly liaises with the importers to transport gypsum from Samdrupjongkhar stockyard including rendering logistics services for importers such as customs clearance, freight advance payment to truckers, and in return EBPL receives handling charges of Nu 20 per metric ton.

However, it was revealed that such collections were used to meet other administrative expenses while transporting gypsum via India. On the other hand, since the EBPL is required to make freight advance to truckers carrying gypsum from Samdrupjongkhar stockyard, receives large amounts of cash besides the bank remittances from both Indian and Nepal importers.

In this regard, the ACC could not establish any compelling evidence to prove and incriminate EBPL of receiving any illegal underpayments from the transport and logistics services rendered to importers or tax evasion or income concealment.

Nonetheless, owing to the nature and legality of such collection and subsequent payments, the ACC sensitized the RMA for the need to reinforce implementation of Foreign Exchange Rules and Regulations to prevent possible money laundering schemes.

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