Mauritius government terminates petroleum shipping contract with Betamax
The cabinet quoted unlawful procedures and processes in the allocation of the contract by STC to Betamax Shipping Ltd as the reason for terminating the contract. (Image: Top FM)
The Cabinet of Ministers noted on Friday, January 30, 2015, that the Contract of Affreightment signed between the State Trading Corporation (STC) and shipping major Betamax Ltd for the transportation of petroleum products to Mauritius is being terminated on grounds of “illegality.”
The cabinet quoted unlawful procedures and processes in the allocation of the contract by STC to Betamax Shipping Ltd as the reason for terminating the contract.
Earlier this month, Prime Minister Anerood Jugnauth had declared at a press conference at the Treasury Building in Port Louis that the contract of Betamax Shipping Ltd with the State Trading Corporation (STC) for the transportation of petroleum products from India to Mauritius will be renegotiated, with negotiations due to start on January 14.
After duly studying the contract in line with the Prime Minister’s declaration, Roshi Bhadain, Mauritius’ Minister of Financial services and Good governance, declared the contract as “illegal.”
Speaking at the press conference at the prime minister’s office, Minister Bhadain claimed that the legal procedures and views were taken into consideration before and after the signature the contract. However, the minister pondered on the fact that, the procedures for the “bid solicitation goes against section 14 of the procurement act”, the award of the contract was issued illegally against the procurement act, and finally, the signature of the contract does not meet the procedures of the procurement act. Considering these points, the STC has decided to cancel the contract with Betamax.
The board of Betamax however, has expressed regret on the decision taken by the Cabinet of Ministers and has made a statement highlighting that this contract was entered into in strict adherence to Mauritian laws.
The Mauritius-based Bhunjun group, which owns Betamax Shipping Ltd, has asserted that the contract was signed in strict legality. Furthermore, the group will once again have to take out time for several months of discussion with officials of various departments, after underlining that it always met its contractual commitments.
The main argument put forward by the Bhunjun Group that “the freight rate proposed by Betamax is lower than that of the market” has been illustrated by proposing a series of comparisons with three tankers, that is Roy Maersk, Ocean Summer and Ocean Victory. This approach had been held up in an ultimate attempt to convince the government not to put an end to this contract of 15 years for the chartering of the MT Red Eagle.
However, the STC highlights that for the first three years and a half of the contract, it paid a whopping sum of USD 121 millions (Rs 3.9 billions) to Betamax, that is an annual average of USD 34.5 million. This amount is clearly higher by USD 24 million a year to the average rates charged by competing freighters.
“Under the contract with Betamax, STC has paid as much as USD 11 million (Rs 355 million) more each year for the transport of its petroleum products from Mangalore to Port Louis,” declares the STC.
“Incidentally, the obligation upon STC to offer to Betamax any and all cargo meant that it has to import beyond the maximum capacity of the MT Red Eagle. This was one of the 5 major weaknesses of the COA entered into with Betamax. Since Betamax owns but one vessel, it provides STC with vessels that it recruits itself on the tanker market. It charges STC on the same rates as applied to the MT Red Eagle in the contract, and not as per market rates,” declared STC Chairman Megh Pillay.
It is recalled that the contract with Betamax, signed in November 2009 and worth Rs 8 billion, was entered into for a period of 15 years.