Trading Corporation of Pakistan (TCP), the state-run grain trader to quickly offload cotton stocks has decided to unveil reserve price for fifth cotton tender two days before the opening date. TCP has been forced to take this step owing to slow cotton off take and cancellation of two tenders earlier, due to less than reserve price quotations. The step taken by TCP will help them get an optimistic response from bidders.
The TCP procured cotton in October-November 2014 on the directives of the federal government to support farmers and stabilize prices in the domestic market. During last two months, cumulatively the TCP conducted four tenders for the sale of 95,400 cotton bales (Crop Year 2014-15). However, it could hardly sell some 10,800 cotton bales as two tenders were scrapped by the state-run grain trader on less than reserve price quotations. The TCP has linked bid prices with Karachi Cotton Association (KCA) spot rates and accordingly describes the reserve price mechanism in each tender by mentioning a specific period of KCA spot rate for reserve prices. However, despite that the TCP was forced to scrap two tenders as quotations were lower than the reserve price.
For the first time, in the last tender, opened on Monday, the TCP disclosed reserve price about 20 hours before the tender opening, yet only one bidder submitted price matching the reserve price. According to the TCP, the fifth cotton tender for sale of 84,600 cotton bales will be opened on September 14, 2015. The reserve price will be posted on the TCP website on September 12 at 5pm for guidance of interested bidders. According to the tender document, a pre-bid meeting of the interested parties will also be held at the TCP to respond to the queries of the interested parties.
The TCP has made it clear that no offer shall be entertained below the reserve price. The reserve price will be calculated on the average KCA spot rate - September 3 to September 12, 2015 for base grade-III, staple length1-1/116. The premium shall be added in the average price for upper grade/staple length as per KCA premium rates applicable for the respective period, the TCP mentioned in the cotton tender.
Interested parties can inspect cotton on September 10 at the TCP''s Pipri Godown and later a pre-bid conference will be held in the Board Room of the TCP office at 3:30 pm.
For the fifth cotton tender which will be opened on September 14, 2015, a minimum 200 bales limit has been fixed for the bid. The Bidders will be required to submit pay order (along with bid) in favour of TCP at 5 percent of total value as bid earnest money. According to the TCP, partial payment will not be allowed to successful bidders of up to 2,000 cotton bales; in this case the successful bidders will make full payment against the procured cotton with 15 days of acceptance letter. However successful bidder, who procured more than 2,000 bales, will be permitted to make partial payment in two equal installments.
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