After the government announced to close down the nearly 5-decade-old subsidiary of Pakistan Railways in the name of rightsizing, questions have been raised about the timing of this decision
Railcop used fake bank guarantees to get contracts, took commissions, and embezzled crores of rupees, questions have been raised about the timing of the closure of the department
Fake guarantees with the names and logos of well-known private banks were submitted, but they were not verified by either the Commercial Department or the Finance and Taxation Wings
Dawn Investigation Cell
Islamabad: After the government announced to close down the nearly 5-decade-old subsidiary of Pakistan Railways in the name of rightsizing, questions have been raised about the timing of this decision.
Available documents reveal that the decision to close down Railway Construction Pakistan Limited (Railcop) was taken after a financial scandal involving the use of fake bank guarantees was exposed in the department.
Earlier this month, the Railway Ministry had decided to close down Railcop and two other entities Pakistan Railway Advisory and Consultancy Services (PRACS) and Pakistan Railway Freight Transportation Company (PRFTC).
The process of terminating regular and contract employees of the institution has begun, as per an official order issued by the Chief Executive of Railcop on April 24.
However, the beleaguered department is facing allegations of a financial embezzlement involving the use of fake bank guarantees around the Indus Valley Industrial Junction (IVIJ), a company affiliated to a newly notified Special Economic Zone (SEZ), but despite allegedly owning 700 acres of land allotted by the government, no real development has been seen on the land.
According to the documents received, Railcop is accused of using fake bank guarantees to secure public contracts and then embezzling over Rs 135 million in commission under the guise of legitimate bid securities, mobilization advances and performance bonds.
Documents received from Railcop’s internal audit confirm that fake guarantees bearing the names and logos of reputed private banks were submitted, but these were not verified by either the commercial department or the finance and taxation wings.
The scheme came under scrutiny after it was pointed out by Railcop’s chief engineer and chief internal auditor.
The alleged fraud took advantage of PPRA Rule 42(F) which allows direct contracting with SOEs without advertisement.
Railcop is believed to have taken advantage of this clause to undercut competitors in the bids by quoting unusually low prices, which was allegedly made possible by avoiding real financial commitments through fake guarantees.
In the financial year 2023-24 alone, fake guarantees worth a total of Rs1.167 billion were offered, out of which over Rs135 million were allegedly distributed as commission to IVIJ.
However, when contacted, Railways Minister Hanif Abbasi said that the three subsidiaries of Pakistan Railways were being closed down as per the government’s ‘rightsizing’ policy.
When asked about the allegations of financial irregularities, the federal minister said that he had nothing to do with the rightsizing decision.
However, he said that the Auditor General of Pakistan (AGP) has already been asked to conduct a special audit of the financial records of these companies.
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