Lahore Transport Company hit by million-dollar dispute

LAHORE: Against signs of growing cooperation between Pakistan and China in various areas, a Chinese bus manufacturer is upset over the deal it has got from the Lahore Transport Company (LTC) which is owned by the Punjab government. The Chinese company, Ankai, has approached its embassy in Islamabad for help in resolving the issue. In case a resolution is not possible, it has warned that it will blacklist the LTC, and review its relations with the Punjab government. In December 2011, the LTC signed an agreement with Ankai to buy buses. At the heart of the dispute is Ankai’s insistence that under the agreement it was to sell 575 buses to the LTC at a cost of $42.5 million ($70,000 per vehicle). These vehicles were to be delivered in various batches. Ankai was required to provide after-sale service in Lahore, for which charges were fixed. The LTC purchased 350 buses from Ankai in three batches, which were then sold to various operators. The Chinese manufacturer accuses the LTC of backing out of its commitment of buying another 225 buses. The LTC officials tell Dawn the decision came after Ankai failed to meet the contractual obligation of establishing a state-of-the-art workshop in Lahore for maintenance. They say the LTC was never ‘bound’ to buy 575 buses from Ankai. “The agreement clearly states the government-LTC will buy up to 575 buses from Ankai,” LTC Chief Executive Officer Khwaja Haider Latif says with an emphasis on ‘up to’. “We were not bound to purchase 575 buses. Moreover the company’s after-sale service is very poor and they have not established the requisite workshop.” A study of the agreement does confirm this LTC assertion. It says the LTC “will buy up to 575 buses” from Ankai. But while elaborating, the agreement’s clause 10.1 mentions that “Ankai will be responsible for timely manufacturing and supply of a fleet of 575 buses to the LTC in various batches”. “Why do they (the LTC officials) only focus on the part which mentions ‘up to 575 buses’. They must go through the explanatory clause,” says Azam Chohan, Ankai’s legal adviser on corporate affairs. Under the contract, the LTC was bound to pay a sum of $12,600 to Ankai against each bus’s maintenance cost (for 500,000km). The LTC is accused of not following this. “We are surprised that they have not paid us the so far calculated maintenance costs even when the buses we repaired at our workshop,” Chohan says. “What we have here is a state-of-the-art workshop, and we have been maintaining the 350 buses delivered to the LTC by Ankai. We are even providing service through mobile workshops to the buses which were part of the same fleet but were operated in Faisalabad, Bahawalpur, Multan, Rawalpindi and other cities of the province. We have a proof and will take the LTC to court on this.” He also blames some senior LTC officials for blocking clearance of maintenance bills totaling Rs150 million.“This is a very serious situation,” Chohan says. “Ankai has already manufactured the remaining 225 buses which are to be delivered to the LTC under the contract. These are worth millions of dollars. They are all parked at our warehouses in China.” He also shares with Dawn the contents of a letter Ankai has recently sent to the Chinese ambassador in Islamabad, requesting him to take up the issue with the Punjab government. “If there is no progress, the company will blacklist the LTC in China,” he says. For his part, LTC Chief Executive Haider Latif maintains it is Ankai and not the LTC which has failed to fulfill its contractual obligations. “Not only is their workshop not up to the mark, they have also been involved in overcharging the bus operators. They have ignored many reminders and even a legal notice that we sent to them,” he says. Latif says the complaints came from the private operators the LTC sold the buses to. “Eventually, we decided to make some alternate maintenance arrangements. We found some vendors at Badami Bagh to directly import the parts from China. The arrangement was successful, but it did annoy people working with Ankai in Lahore. “Increasing complaints from the operators’ and shortage of CNG are two reasons behind our reluctance to purchase more buses from Ankai,” he says. “As for the maintenance costs, we are ready pay Ankai as soon as they have that promised modern workshop here.”