Track and Trace System: Government Hasn’t Lost a Penny Due to Implementation Delays?

ISLAMABAD: The Pakistan government has not lost a single penny due to delays in implementing the track and trace system, top government officials claim.

This was reported by sources close to the project Business Registrar that the delay was mainly due to prolonged court proceedings and delays in signing contracts with the relevant sectors. Contracts have been delayed and litigation has caused a delay in the implementation of the track and trace system. They asked how the company bears responsibility when the relevant sectors are not ready to install the system and adopt delaying tactics

Sources raise the issue that if the signing of the TPA between the FBR and a particular sector/industry has been delayed, how should the investor company be held responsible for the delay.

The Government of Pakistan did not invest a single penny in the project and the entire cost was borne by the licensed company and relevant sectors.

If the government made any attempt to change the company, it would not only harm foreign investment but also cause endless litigation.

Track and trace program: Bureaucratic hurdles threaten massive FDI

FBR has given four months (April 30, 2024) to the cement sector to ensure availability of automatic applicators and other appropriate equipment required for operation of TTS in automated mode; however, sources say that the deadline has passed and the FBR is silent due to the ongoing investigation. Recently, FBR also published the License Manual for implementing TTS on 150 lines, which is a gross violation of the agreement signed with the consortium. The consortium has exclusive authority to implement TTS in all four sectors.

Track-and-Trace licensees consisting of Authentix Inc, AJCL Private Limited and MITAS Ltd, the consortium has been awarded the project to implement TTS in four sectors: tobacco, cement, sugar and fertilizers.

However, bureaucratic hurdles at the FBR have jeopardized the landmark track and trace program. Not only has the program not been fully implemented, thereby failing to achieve the desired results for the Republican Party and creating obstacles in discussions with multilateral lenders looking to improve tax digitalization, but it has also put tens of millions of dollars worth of FDI at risk.

Recently, a commission of inquiry headed by Tariq Bajwa also severely criticized the FBR for its incompetence in implementing TTS.

The report of the Bajwa-led committee stated that the FBR was expected to complete the project by February 2022, but litigation and litigation are holding up the implementation, bureaucratic inefficiency and incompetence of FBR officials are delaying the implementation of TTS.

The report said that a project director with a small team will not be able to achieve anything unless a whole-of-FBR or even whole-of-government approach is adopted.

The report also pointed out that FBR’s IREN – an 87-personnel enforcement unit – has virtually no physical presence on the premises, allowing illegal and smuggled cigarettes to be freely available in the market.

Moreover, this has also led to a decline in industrial interest in the tobacco and cement sectors, with the major revenue leakages being related to the sale of smuggled and duty-unpaid products in the market.

The report revealed that it further found that the number of plants and production lines in the notified sectors as given in the IFL and SDA is less than what is actually on the ground, illustrating the degree of unawareness of the FBR about the manufacturing landscape in the country.

For example, in the cement industry, the number of production lines was over 200, while the FBR had just mentioned 50 in the tender documents, which indicates a four-fold increase in the number of production lines in the cement sector alone. According to sources, the licensee has submitted change orders as per the provisions of the agreement regarding additional costs related to equipping these additional lines, which have not been addressed by the FBR for two years now.

Meanwhile, FBR has also directed the Licensee to install the system on one production line in a cement plant instead of implementing it across the cement sector.

Commenting on this issue, the committee chaired by Tariq Bajwa stated that the performance of the solution was severely reduced as a result of continuous operation of those production lines where the system is not implemented and was of the view that the FBR may direct the Licensee to implement TTS in the entire cement process sector.

“FBR’s contract terminations have impaired the management and oversight of the project and have caused undue delay in resolving outstanding issues between the Licensee and FBR.”

The Commission considers that, although the current technological solution has not delivered full results due to incomplete implementation, termination of the contract at this stage will trigger legal proceedings and lead to prolonged delays in the implementation of the TTS, resulting in revenue declines and repeal from the contract, especially considering the fact that FBR has not developed any internal capacity plan or contingency plan to take over the system in the event of termination of the contract,” the report said.

The FBR recognized the achievements of TTS at various forums and the key role it has played in ensuring overall transparency of production data, facilitating digital monitoring of production, and also reduced production suppression, which minimizes regulatory evasion.