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Tuesday, August 19, 2014

Cabinet puts fuel subsidy job award on hold

Putrajaya is understood to have held back the award of a fuel subsidy contract to Fuelsubs House Sdn Bhd as some ministers are concerned that such a move would raise questions of objectivity. – The Malaysian Insider file pic, August 19, 2014.Putrajaya is understood to have held back the award of a fuel subsidy contract to Fuelsubs House Sdn Bhd as some ministers are concerned that such a move would raise questions of objectivity. – The Malaysian Insider file pic, August 19, 2014.
Putrajaya is understood to have held back the award of a contract — for the management of the proposed fuel subsidy rationalisation programme — to Fuelsubs House Sdn Bhd.
Sources familiar with the matter told The Edge Financial Daily that a Cabinet meeting chaired by Deputy Prime Minister Tan Sri Muhyiddin Yassin last week did not reach a full consensus on the award of the contract to Fuelsubs, which had been deemed the front runner for the job, as some ministers were concerned that awarding the contract via direct negotiation would raise the question of objectivity.
“This [fuel subsidy management project] is not something where there is only one specialist supplier as in defence contracts, so it was decided that in the interests of transparency and good governance, there must be a review as to how this project is awarded.
He added that the matter will be discussed again at the next cabinet meeting after Prime Minister Datuk Seri Najib Razak returns from leave.
Minister in the Prime Minister’s Department Datuk Paul Low, whose portfolio covers transparency, good governance and anti-corruption measures, is understood to be among those who raised alarm bells over how the fuel subsidy management project was initially meant to be awarded, and on this had previously advised Najib that Putrajaya could do without the adverse scrutiny.
The fuel subsidy rationalisation scheme entails the implementation of a selective fuel subsidy programme targeting the lower-income groups, which privately-held Fuelsubs had been touted to be the front runner for the project for some time.
Indeed, Bursa Malaysia-listed Datasonic Group Bhd had in June entered into an agreement to acquire as much as a 30% stake in Fuelsubs for RM10 million, should the latter bag the fuel subsidy management contract. Tan Sri Syed Mokhtar Al-Bukhary’s Pos Malaysia Bhd is also understood to have formed a joint venture with Datasonic and Fuelsubs for the project.
Datasonic has its mainstay in the production of smart cards, while Pos Malaysia operates 730 post offices in the country.
There were known to be other parties that had expressed interest in the fuel subsidy management project. Some of the names bandied about include Iris Corp Bhd, MyEG Services Bhd, and MOL AccessPortal Sdn Bhd to name a few. MyEG, however, is understood to have backed out of the race for the project. Another relatively big name that was touted to have expressed interest is Dialog Group Bhd, but it is not clear if the company had made any inroads to bag the contract.
Fuelsubs which was registered in November 2013 is about 70% controlled by Habibul Rahman Kadir Shah, and almost 25% by Datuk Razali Merican Naina Merican while some 5% of the company is controlled by Zaid Kedershah.
Reports have it that Habibul is closely linked to Umno, the lead member of the ruling Barisan Nasional coalition. He also sits on the boards of Group Lotus plc, a unit of national carmaker Proton Holdings Bhd which in turn is controlled by Syed Mokhtar’s DRB-Hicom Bhd, Twin River Technologies Holdings Inc — which is controlled by Felda Global Ventures Holdings Bhd — and was earlier this year appointed to the board of Petronas Energy Trading Ltd, a unit of national oil firm Petroleum National Bhd.
Razali, meanwhile, is the brother of politician Datuk Seri Reezal Merican Naina Merican who is the Member of Parliament for Kepala Batas in Penang. In January this year Reezal was appointed chairman of Amanah Raya Bhd, a unit of state controlled unit trust outfit Permodalan Nasional Bhd.
The fuel subsidy rationalisation programme is imperative as Putrajaya spent a total of RM28.9 billion on fuel subsidies in 2013. A year ago in 2012 the tab was RM27.9 billion.
Reports of Fuelsubs likely winning the fuel subsidy management contract have spurred the share prices of Pos Malaysia and Datasonic.
From mid-May this year to end July, Pos Malaysia’s share price had gained about 22% or almost RM1 to hit a high of RM5.46, in response to news of the company forming a venture with Datasonic and Fuelsubs for the project. The stock closed at RM5.19 yesterday, slipping one sen.
Datasonic, meanwhile, saw its share price gain some 100% from January this year to close at RM1.99 yesterday. The stock had even hit a high of RM2.41 in March on speculation of the firm likely winning the contract. – The Edge Financial Daily

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