Pipeline centrestage for censure debate

Pipeline centrestage for censure debate

The opposition will soon highlight the bidding process for the eastern region water project. There are multiple reasons why this is happening,

Transparency, or the alleged lack of it, in the bidding for a concession to manage and operate the main water transmission pipeline system for the eastern region, including the government's flagship Eastern Economic Corridor (EEC), is set to be the highlight of the planned censure debate.

The Bangkok Post takes a look at the 25-billion-baht water project that, according to the opposition, may decide the fate of the government.

What is known about the main water transmission pipeline system for the east?

The Treasury Department awarded a concession to Eastern Water Resources Development and Management Public Co, or East Water, to lease/manage the water transmission work. Currently, the system comprises three pipelines: Dok Krai, Nong Pla Lai-Nong Khor and Nong Khor-Laem Chabang.

East Water was granted the concession to manage/operate the Dok Krai pipeline in 1994 which was at that time valued at 772.09 million baht. The concession will expire on Dec 31 next year.

The Nong Pla Lai-Nong Khor pipeline, which was handed over from the Department of Public Works and Town & Country Planning in 1997, is being operated by East Water pending contract signing. The project was valued at 2.2 billion baht at the handover.

The Nong Khor-Laem Chabang Phase 2, valued at 254.87 million baht, was handed over from the Department of Public Works and Town & Country Planning in 1998. East Water has been hired by the Treasury Department to operate the water transmission work pending contract signing.

On June 11 last year, the Ratchaphatsadu Land Committee resolved to allow the private sector, via a bidding process, to lease/manage the main water transmission pipeline system for the east under a single contract which combines the three pipelines.

Why is no bid held to find the operator of the other two pipelines?

According to the Treasury Department, the bidding was not organised because its contract partner at that time was a state enterprise agency, which was set up in 1992 by a cabinet resolution to serve as a core unit in the development and management of main water pipelines for the eastern region.

Back then, East Water was 100% owned by the Provincial Waterworks Authority (PWA), a state enterprise. When the water transmission work expanded, it was agreed that East Water should take over the management and operation of the other two pipelines.

In 1997, East Water became a public company which is 40.20% owned by the PWA. The Treasury Department decided that the company should continue operating the two pipelines to avoid impacting water consumers.

After East Water's change of status, the management and operation of the water transmission work should fall under joint public-private partnership law.

However, Section 29 of the Ratchaphatsadu Land Act stipulates that if a project's value does not exceed 5 billion baht, it will fall under the Ratchaphatsadu Land Act. This resulted in the bidding being held under the Ratchaphatsadu Land Act, not the joint public-private partnership law.

With the Dok Krai pipeline contract scheduled to end in December 2023, the Treasury Department called for bids in July last year. The new concession has a term of 30 years.

Who won the bid and what happened in between?

Following the Treasury Department's announcement on the bidding process on July 16 last year, five companies were qualified to take part in the bidding with three of them submitting their bid envelopes on Aug 9. Two of the bidders were East Water and Vongsayam Korsang Co.

On Aug 26, the bid selection committee cancelled the bidding process and issued a new bid invitation on Sept 10. In a recent media interview, Deputy Finance Minister Santi Promphat said the revocation of the first round was due to incomplete bidding terms of reference in the contract.

In the second bidding, the five qualified companies were invited to take part and the bid submission date was set on Sept 28 with the outcome scheduled to be announced on Sept 30.

Vongsayam Korsang won the bid with an offer of 25.6 billion baht for the 30-year contract, beating East Water which offered 24.2 billion baht. Under the term of reference (ToR), water fees, to be charged to consumers throughout the 30-year contract, must not exceed 10.98 baht/unit, compared to East Water's current fees of 13 baht/unit.

On Sept 23 last year, East Water petitioned the Central Administrative Court seeking the suspension of the second bid. On Nov 14, the court dismissed the request for the interim injunction on grounds that the company can still take part in the second bid.

However, East Water's petition for the court to revoke the termination of the first bid is still pending the Administrative Court review.

In March the Treasury Department named Vongsayam Korsang the winning bidder, but the signing of the contract between the Treasury Department and the firm was postponed pending a probe to ensure transparency.

The Finance Ministry has set up a panel to look into three aspects -- legitimacy of the bidding process; physical conditions of water transmission and related systems; and water usage in comparison with the size of revenues handed over to the state.

What is next?

The Treasury Department may proceed to sign the contract without waiting for the Administrative Court's ruling, which may be handed down before or after the end of the current concession in December next year.

If the department chooses to wait and allow East Water to operate the water transmission work until the case is finalised to avoid impacting water consumers, it may need to review the benefits to be paid by East Water.

In March this year, Mr Santi said from 1994 until now East Water has paid a concession benefit to the state of 552 million baht, while the state coffers would gain 25.6 billion baht from the new concession.

Vongsayam Korsang may withdraw, which will force a new round of bidding.



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